The Fangorn Forest Furniture Company makes outdoor furniture from aged wood. Fangorn€™s two primary product lines are chairs and tables. Pippin Took, founder and owner of the Fangorn Forest Furniture Company, is somewhat dismayed that sales of tables are not going as well as planned. Data for the most recent quarter (three months) of operations are as follows:

Pippin was certain that the lagging sales on tables were due to a lack of effort on the part of his sales force (Pippin believes that his sales force is pushing the lower-priced chairs rather than the higher-priced tables). To spur sales of tables, Pippin is considering rewarding the salesperson who sells the most tables in each quarter with an all-expense paid vacation for two to Hawaii.

Required:
a. Suppose the Hawaii vacation will cost Pippin $6,000. How many additional tables need to be sold each quarter to justify running the sales contest?
b. Pippin believes that offering the trip to Hawaii will increase table sales by 288 units per quarter. By how much is quarterly profit on the tables product line expected to increase?
c. Pippin€™s close friend, Merry Brandybuck, mentions to Pippin that since the contest only rewards sales of tables, chair sales actually may decrease. What do you think€”is this possible? By how much would sales on chairs have to decrease before it is no longer profitable for Pippin to offer the trip to Hawaii (as in part [b], assume the trip is expected to increase quarterly table sales by 288 units)?
d. In addition to the consideration in part (c), what other factors should Pippin consider before running the salescontest?

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Chairs Quantity sold Revenue Direct materials Direct labor Contribution margn Traceable fixed costs Common fixed costs Profit 8.000 1.500 $800,000 S375,000 S1,175,000 288000 140.625 428.625 192,000 75238.875 S320,000 187,500 S507,500 125.000 100.000 225.000 46.875 75000 150,000 S12.500 S132,500 S120.000 These costs relate to space, equipment, and personnel used by hoth the chairs and tables product lines ( g. costs of runring the factory, admnistrative costs, Pippin's salary). Because these costs are common to both product lnes, Pirpin has allocated an equal amount to each product line