Question

​Isabellas, Inc., a local convenience​ store, sells soft drinks. It sells two large drinks for every small drink. A large drink sells for $ 3.00 with a variable cost of $ 0.60. A small drink sells for $ 1.25 with a variable cost of $ 0.50. The weighted average contribution margin is​ ________. (Round any intermediate calculations and your final answer to the nearest​ cent.) A. $ 2.40 per drink B. $ 1.58 per drink C. $ 1.85 per drink D. $ 5.55 per drink

Answer 1

Answer:

Weighted average contribution margin= $1.85

Explanation:

Giving the following information:

It sells two large drinks for every small drink. A large drink sells for $3.00 with a variable cost of $ 0.60. A small drink sells for $ 1.25 with a variable cost of $ 0.50.

To calculate the weighted average contribution margin, we need to use the following formula:

Weighted average contribution margin= (weighted average selling price - weighted average unitary variable cost)

Sales proportion:

Large drink= 0.67

Small drink= 0.33

Weighted average contribution margin= (0.67*3 + 0.33*1.25) - (0.67*0.6 + 0.33*0.5)

Weighted average contribution margin= 2.4225 - 0.567

Weighted average contribution margin= $1.85