Question

Question 5. Bobby admired his wife's success at selling scarves at local craft shows, so he decided to make two types of plant stands to sell at the shows. Bobby makes twig stands from twigs he collects from a friend's farm, so his variable cost is minimal (wood screws, glue, and so forth). However, Bobby has to purchase wood to make his oak plant stands. His unit prices and costs are as follows: Twig Stands Oak Stands $45.00 Sales price............ Variable cost. 3.50 14.00 The twig stands are more popular, so Bobby sells four twig stands for every one oak stand. Susie charges her husband $510 to share her booth at the craft shows (after all, she has paid the entrance fees). How many of each plant stand does Bobby need to sell to break even? 6 points

Answer 1

Contribution margin per unit = (17-3.50*4/5+45-14*1/5) = 17

Break even unit = Fixed cost/Contribution margin per unit = 510/17 = 30

Twig stands = 30*4/5 = 24

Oak stands = 30*1/5 = 6