Question

Ramirez Corporation sells two types of computer hard drives. The sales mix in terms of units is 30% (Q-Drive) and 70% (Q-Drive Plus). Q-Drive has variable costs per unit of $90 and a selling price of $150. Q-Drive Plus has variable costs per unit of $105 and a selling price of $195. The weighted-average unit contribution margin for Ramirez is

Answer 1

The weighted average unit contribution is $81 per unit.

Step-by-step explanation:

The contribution per unit is the amount each unit contributes to covering the fixed costs. It is calculated by deducting the variable cost per unit from the selling price per unit.

The weighted average unit contribution is used when there are more than one product that a company produces and is used in calculating the overall or composite break even point. The weighted average unit contribution is the overall unit contribution for all of the products of the company according to their weights in the sales mix.

For a company that produces two products,

Weighted average unit contribution = Contribution per unit of Product A * Weight of Product A in sales mix + Contribution per unit of Product B * Weight of Product B is sales mix

Weighted average unit contribution = (150 - 90) * 0.3 + (195 - 105) * 0.7

Weighted average unit contribution = $81 per unit