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kodGreya [7K]
3 years ago
14

A company sells two products. Product A sells for $10.00 per unit and Product B sells for $8.00 per unit. Variable costs are $3.

00 for Product A and $2.50 for Product B. If the sales mix is 70% Product A and 30% Product B, the weighted average contribution margin is _____.
Business
1 answer:
Yuri [45]3 years ago
4 0

Answer:

$6.55

Explanation:

A company sells two products. Product A sells for $10.00 per unit and Product B sells for $8.00 per unit. Variable costs are $3.00 for Product A and $2.50 for Product B. If the sales mix is 70% Product A and 30% Product B, the weighted average contribution margin is _____.

Step 1

Calculate Contribution per product = Selling Price - Variable Costs

Contribution for A = 10 - 3 = 7

Contribution for B = 8 - 2.5 = 5.5

Step 2

Multiply the Contribution per product by its sales mix

A = 7 x 70% =  4.9

B = 5.5 x 30% = 1.65

Step 3

Add up the weighted contribution margins for each product

Therefore the the weighted average contribution margin for both product is (4.9 + 1.65) = $6.55

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