Question - Assume the Midwest Furniture Company sells two kinds of picnic tables, pine and redwood. At a 3:1 unit sales mix in which Midwest sells three pine tables for every redwood table, the following revenue and cost information is available.
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Pine Table
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Redwood Table
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Unit selling price
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$200
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$600
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Unit variable costs
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$125
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$ 275
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Unit contribution margin
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$75
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$ 325
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Fixed costs per month: $18,150
Required: Assuming a 3:1 sales mix:
a) Calculate Midwest Furniture's current monthly average unit contribution margin.
b) Break-even sales volume.
c) Number of units of Pine and Redwood tables at break-even point.
d) Describe what the effect a change in the sales-mix would have on contribution margin.