Question

Sheffield Corp. sells two types of computer hard drives. The sales mix is 30% (Q-Drive) and 70% (Q-Drive Plus). Q-Drive has variable costs per unit of $150 and a selling price of $210. Q-Drive Plus has variable costs per unit of $180 and a selling price of $270. The weighted-average unit contribution margin for Sheffield is :A. $69. B. $210. C. $105. D. $81.

Answer 1

Answer:

D. $81.

Explanation:

We know that,

Contribution margin per unit = Selling price per unit - Variable expense per unit

For Q-Drive, it would be

= $210 - $150

= $60

For Q-Drive Plus, it would be

= $270 - $180

= $90

Now the weighted contribution margin would be

= Q-Drive contribution margin × sales mix + Q-Drive Plus contribution margin × sales mix

= $60 × 30% + $90 × 70%

= $18 + $63

= $81