Question

Colossal Beverages Company sells two​ products, A and B. Mist predicts that it will sell​ 2,500 units of A and​ 2,000 units of B during the next period. The unit contribution margins are​ $4.00 and​ $4.80 for products A and​ B, respectively. What is the​ weighted-average unit contribution​ margin? (Round your answer to the nearest​ cent.)

Answer 1

The correct answer is $4.36.

Step-by-step explanation:

According to the scenario, the given data are as follows:

Product A = 2,500 units

Products B = 2,000 units

Contribution margin of A = $4

Contribution margin of B = $4.80

So, we can calculate the weighted-average unit contribution​ margin by using following formula:

Weighted-average unit contribution = (Total contribution Of product A + Total contribution of product B) ÷ Total number of units sold

Where, Total contribution Of product A = 2,500 units × $4 = $10,000

And Total contribution of product B = 2,000 units × $4.8 = $9,600

By putting the value, we get

Weighted-average unit contribution = ($10,000 + $9,600) ÷ 2,500 + 2,000

= $19,600 ÷ 4,500

= $4.36