Spilker Company makes and sells three types of picture frames: wood, metal, composite. Data from the past month related to these three products follows: Unit Sales Price Unit Contribution Margin Units sold Wood frames $55 $35 10,000 Metal frames $80 $50 12,000 Composite frames $95 $60 23,000 Total company fixed costs: $235,000. The expected sales mix next month for wood, metal and composite frames is 30%, 50% and 20% respectfully and the desired overall company profit is $200,000. What would be the number of units of metal frames that would need to be sold

Spilker Company

The number of units of metal frames that would need to be sold is:

= 4,350 units.

Explanation:

a) Data and Calculations:

                       Unit Sales Price  Unit Contribution Margin  Units sold

Wood frames             $55                         $35                         10,000

Metal frames             $80                         $50                         12,000

Composite frames    $95                         $60                        23,000

Total company fixed costs:   $235,000

Desired company profit:       $200,000

Total company contribution $435,000

Expected sales mix next month:

                 Sales Mix  Total Contribution                  Number of Units

Wood            30%      $130,500 ($435,000 * 30%)  3,729 ($130,500/$35)

Metal            50%      $217,500 ($435,000 * 50%)  4,350 ($217,500/$50)

Composite   20%       $87,000 ($435,000 * 20%)   1,450 ($87,000/$60)

Total contribution    $435,000

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