ZTL Corporation produces three products. Cost, price, and volume data is shown below: Total Fixed costs $2,400
Tax rate 40%
Picture Candle CD
Holders Holders Holders
Normal volume 300 150 200
Price per unit $5 $7 $10
Variable cost per unit 2 3 4
When using units as the measure, what proportion of the sales mix do picture holders represent? Round to the nearest whole percent.

Question

Quizplus · Accepted Answer

To calculate the proportion of sales mix for picture holders, we need to calculate the total contribution margin for each product and then use the formula:
Proportion of sales mix = Contribution Margin of the product / Total Contribution Margin

Contribution margin of Picture Holders = (10-4) = 6
Contribution margin of CD Holders = (7-3) = 4
Contribution margin of Candle Holders = (5-2) = 3

Total Contribution Margin = (6*300) + (4*150) + (3*200) = 3000

Proportion of sales mix for Picture Holders = (6*300) / 3000 = 0.6 or 60%

Rounded to the nearest whole percent, picture holders represent 46% of the sales mix (60% rounded to the nearest whole percent). Therefore, the best choice is B.

ZTL Corporation Produces Three Products