The Fantastic Furniture Company makes outdoor furniture from aged wood. Fantastic's two primary product lines are chairs and tables. Management is somewhat dismayed that sales of tables are not going as well as planned. Data for the most recent three quarter (three months) of operations are as follows:

Management was certain that the lagging sales on tables were due to a lack of effort on the part of the sales force (the company believes that the sales force is pushing the lower-priced chairs rather than the higher-priced tables). To spur sales of tables, Management 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 Fantastic $6,000. How many additional tables need to be sold each quarter to justify running the sales contest?
b. Company management 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?

Transcribed Image Text:

Chairs Tables Total Quantity sold 8,000 800,000 S375,000 $1.175.000 88,000 140,625 428,625 Direct materials Direct labor Contribution margin Traceable fixed costs Common fixed costs 192,000 46875 238875 46.875 320000 S187,500 $507.500 5,000 100,000 225,000 238,875 75000 150 S12.500 S132 These costs relate to space, equipment, and personnel used by both the chairs and tables product lines (e.g costs of anning the factory, administrative costs), Because these costs are common to both procuct lines, managemene has allocated an equal amont to each product