Question

Tonto Rain Shields sells 3 types of umbrellas. Umbrella A sells for $20 and has variable cost of $9.00 per unit. Umbrella B sells for $17.00 and has variable cost of $12.00 per unit. Umbrella C sells for $9.00 and has variable costs of $6.00 per unit. The company sells in a mix of 2 units of A, 3 units of B, and 5 units of C. What is the weighted average contribution margin per unit for Tonto

Answer 1

$5.2

Step-by-step explanation:

Weighted average Contribution margin = (Selling Price per unit - Variable Cost per unit) of the 3 umbrella / Number of Unit

Weighted average Contribution margin = [($20-$9)*2 + ($17-$12)*3 + ($9-$6)*5 ] / (2+3+5)

Weighted average Contribution margin = [$22 + $15 + $15] / 10

Weighted average Contribution margin = $52 / 10

Weighted average Contribution margin = $5.2

So, the weighted average contribution margin per unit for Tonto is $5.2