Answer:
Option (D) is correct.
Explanation:
Given that,
Willow had a sales mix of 60% Resume Reader and 40% Cover Letter Cure.
Each sales representative sold = 1,400 units
Contribution margin from the sale of Resume Reader:
= Sales revenue - Variable manufacturing costs - Sales commission
= (1,400 × $500 × 60%) - (1,400 × $300 × 60%) - (1,400 × $500 × 60% × 7%)
= $420,000 - $252,000 - $29,400
= $138,600
Contribution margin from the sale of Cover Letter Cure:
= Sales revenue - Variable manufacturing costs - Sales commission
= (1,400 × $1,000 × 40%) - (1,400 × $650 × 40%) - (1,400 × $1,000 × 40% × 5%)
= $560,000 - $364,000 - $28,000
= $168,000
Therefore, the total contribution to company profits is as follows:
= Contribution margin from the sale of Resume Reader + Contribution margin from the sale of Cover Letter Cure
= $138,600 + $168,000
= $306,600
