Question

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2.

Product A sells for $87; Z sells for $108.
Variable costs for product A are $46; for Z $53.
Fixed costs are $430,500.

Compute the contribution margin per composite unit.


a)$205.

b)$305.

c)$287.

d)$315.

e)$336.

Answer 1

Option (d) is correct.

Step-by-step explanation:

Contribution margin per unit for Product A:

= Selling price - variable cost

= $87 - $46

= $41

Contribution margin per unit for Product Z:

= Selling price - variable cost

= $108 - $53

= $55

contribution margin per composite unit:

= (Contribution margin per unit for Product A × 5) + (Contribution margin per unit for Product Z × 2)

= ($41 × 5) + ($55 × 2)

= $205 + $110

= $315