Question

Shugart sells two products. Product A sells for $88 with variable costs of $38. Product B sells for $143 with variable costs of $47. The sales mix is 32% for products A while product B's is the remainder (or 100% less 32. What is the weighted average unit contribution margin rounding to the nearest penny? As always, do not use $ signs.

Answer 1

Answer:

$81 approx

Explanation:

Contribution margin refers to sales receipts in excess of variable costs incurred. This represents contribution from a product earned which is after variable costs have been incurred.

Product A

Selling price per unit = $88

Variable cost per unit = $38

Contribution per unit = Selling price per unit - Variable cost per unit

Contribution margin per unit = $88 - $38 = $50

Similarly, for product B,

Contribution margin per unit = $143 - $47= $96

Products         Weights            Contribution        Weighted contribution

A                       0.32                    50                            16

B                       0.68                    96                            65.28

                         1.00                                                     81.28

Hence, weighted average contribution margin is $81.28 or $81 approx