Question

Archer Industries sells three different sets of sportswear. Sleek sells for $30 and has variable costs of $18; Smooth sells for $50 and has variable costs of $30; Potent sells for $70 and has variable costs of $45. The sales mix of the three sets is: Sleek, 50%; Smooth, 30%; and Potent, 20%.
What is the weighted-average unit contribution margin?

Answer 1

Answer:

Weighted average unit contributIoN = $17

Explanation:

Weighted average contribution margin is applicable where a business sells more than one product in a constant mix or proportion. It gives an idea of how much is made on the average as contribution from th sale of a unit.

It is determined as follows

Step 1

Contribution per unit

Contribution per unit = selling price - unit variable cost

                                          Sleek      Smooth       Potent

Selling price                        30              50              70

Variable cost                    (18)                (30)            (45)

Contribution  ($)                12                  20             25

step 2

weighted average unit contribution

= (50%×12) +  (30%×20) + (20%×25)

= $17