The correct option is B. The weighted average contribution margin per unit for a company selling two products, with twice as many units of A as B, is calculated by multiplying the contribution margin per unit of A by 2/3 and adding it to the contribution margin per unit of B multiplied by 1/3.
Option B accurately describes the weighted average contribution margin per unit for a company selling two products, A and B, with a ratio of twice as many units of A as B. To calculate the weighted average, the contribution margin per unit of each product is considered proportionally based on the sales mix. In this case, since product A sells twice as many units, it carries a greater weight in the calculation.
The formula for the weighted average contribution margin per unit (CMA) is given by:
CMA = (CMa × Weight of A) + ( CMb × Weight of B)
Here, CMa and CMb are the contribution margins per unit for products A and B, respectively. The weights are the proportions of units sold for each product, and in this scenario, product A's weight is 2/3, and product B's weight is 1/3.
So, the formula becomes:
CMA = (CMa × 2/3) + (CMb × 1/3)
This aligns with option B, where the contribution margin per unit of product A is multiplied by 2/3, and the contribution margin per unit of product B is multiplied by 1/3. This approach correctly reflects the contribution margin per unit based on the sales mix, providing a more accurate representation of the overall weighted average for the company's product portfolio.