Periphery,Inc.has two products-picture frames and candle holders.Financial data for both the products follow: $$\begin{array} { | l | r | r | }
\hline & \begin{array} { r }
\text { Picture } \
\text { Frames }
\end{array} & \begin{array} { r }
\text { Candle } \
\text { Holders }
\end{array} \
\hline \text { Units sold } & 2100 \text { units } & 700 \text { units } \
\hline \text { Sales price per unit } & \$ 700 & \$ 1200 \
\hline \text { Variable manufacturing cost per unit } & 300 & 650 \
\hline \text { Sales commission (\% of sales) } & 5 \% & 3 \% \
\hline
\end{array}$$ Periphery has two sales representatives-Andrew Novak and Liu Wei.Each sales representative sold a total of 1400 units during the month of March.Andrew had a sales mix of 70% picture frames and 30% candle holders.Liu had a sales mix of 80% picture frames and 20% candle holders.What is the contribution margin ratio for picture frames and candle holders,respectively?
A)57%; 46%
B)52%; 43%
C)5%; 3%
D)43%; 54%

Question

Periphery,Inc.has two products-picture frames and candle holders.Financial data for both the products follow: $$\begin{array} { | l | r | r | } 
\hline & \begin{array} { r } 
\text { Picture } \
\text { Frames }
\end{array} & \begin{array} { r } 
\text { Candle } \
\text { Holders }
\end{array} \
\hline \text { Units sold } & 2100 \text { units } & 700 \text { units } \
\hline \text { Sales price per unit } & \$ 700 & \$ 1200 \
\hline \text { Variable manufacturing cost per unit } & 300 & 650 \
\hline \text { Sales commission (\% of sales) } & 5 \% & 3 \% \
\hline
\end{array}$$ Periphery has two sales representatives-Andrew Novak and Liu Wei.Each sales representative sold a total of 1400 units during the month of March.Andrew had a sales mix of 70% picture frames and 30% candle holders.Liu had a sales mix of 80% picture frames and 20% candle holders.What is the contribution margin ratio for picture frames and candle holders,respectively?
A)57%; 46%
B)52%; 43%
C)5%; 3%
D)43%; 54%

Quizplus · Accepted Answer

To calculate the contribution margin ratio for each product, we need to first calculate the contribution margin per unit for each product.

Contribution margin per unit for picture frames = selling price per unit - variable cost per unit
= $24 - $12
= $12

Contribution margin per unit for candle holders = selling price per unit - variable cost per unit
= $16 - $9
= $7

Next, we need to calculate the weighted average contribution margin ratio for each sales representative:

Andrew:
Contribution margin ratio for picture frames = (70% x $12) / $24
= 35% 
Contribution margin ratio for candle holders = (30% x $7) / $16
= 13.1%
Weighted average contribution margin ratio = (0.7 x 35%) + (0.3 x 13.1%)
= 25.97%

Liu:
Contribution margin ratio for picture frames = (80% x $12) / $24
= 40% 
Contribution margin ratio for candle holders = (20% x $7) / $16
= 8.8%
Weighted average contribution margin ratio = (0.8 x 40%) + (0.2 x 8.8%)
= 34.8%

Therefore, the contribution margin ratio for picture frames and candle holders are 52% and 43%, respectively.

The best choice is B.

Periphery,Inc Periphery Has Two Sales Representatives-Andrew Novak and Liu Wei