Question

The Buttercrust Pizza Company sells pizzas in two different sizes—medium and large. The number of medium pizzas sold is twice the number of large pizzas sold. The contribution margin of a medium pizza is $10, and the contribution margin of a large pizza is $22. The weighted average contribution margin is $16.00.

Answer 1

Answer:

False

Explanation:

The weighted average contribution margin is calculated by multiplying individual contribution margin with respective size pizzas (i.e number of units sold) then total contribution margin (i.e of both medium and large size) is divided upon total number of units sold, see as follows:

According to Buttercrust Pizza company's sales data medium pizzas sold are twice the number of large pizzas. Now here we have to take an assumption since we aren't given actual sales units. Keeping in mind the sales data we can assume that 100 units of medium pizzas and 50 units of large pizzas are sold during the period.

Contribution margin of medium pizza: (CM× units of medium size pizzas)

Contribution margin of large pizza: (CM× units of large size pizzas)

Contribution margin of medium pizza: $10× 100 = $1000

Contribution margin of large pizza: $22× 50 = $1100

Total contribution (of both pizza sizes) = $2100

Total sales units (of both pizza sizes) = 150

The weighted average contribution margin is calculated as follows:

WACM= $2100÷ 150

WACM= $14

(Disclaimer: the solution of this question has been concluded using self-induced assumptions.)