Question

Larry Company makes and sells 2 models of dishwashers, Model ABC and Model XYZ. For every 2 Model ABC sold, 3 Model XYZ are sold. What is the weighted average contribution margin?

Model ABC: Sales per unit $450, Variable Cost per unit $250, CM per unit $200
Model XYZ: Sales per unit $700, Variable Cost per unit $300, CM per unit $400

Answer 1

The weighted average contribution margin for Larry Company's dishwasher models is calculated based on the ratio of sales for each model and their respective contribution margins. By combining these, we find that the weighted average contribution margin is $320.

Step-by-step explanation:

The question is asking how to calculate the weighted average contribution margin for two models of dishwashers sold by Larry Company, Model ABC and Model XYZ. To find this, we first recognize that for every 2 units of Model ABC sold, 3 units of Model XYZ are sold. This gives us the ratio of ABC:XYZ as 2:3.

We calculate the weighted contribution margin by multiplying the contribution margin (CM) of each model by the proportion in which they are sold and then summing up these values.
Here is the weighted average contribution margin calculation step-by-step:

So, the weighted average contribution margin is $320.