Question

Suppose that a firm makes two products, A and B. The sales mix in units for the period is 70% for A and 30 % for B. If the unit contribution margin for A is $8.04 and the unit contribution margin for B is $5.92, then the weighted-average unit contribution margin is:

Answer 1

Answer:

The weighted-average unit contribution margin is $7.40

Explanation:

The weighted average unit contribution margin is given by the below formula:

weighted-average unit contribution margin=Wa*Margin of A+Wb*Margin of B

Wa is the weight of product A=70% or 0.70

Margin of product A is $8.04

Wb is the weight of product B =30% or 0.30

Margin of product B is $5.92

weighted-average unit contribution margin=(0.70*$8.04)+(0.30*$5.92)

weighted-average unit contribution margin=$ 7.40