Question

Archer Industries sells three different sets of sportswear. Sleek sells for $30 and has variable costs of $18; Smooth sells for $50 and has variable costs of $30; Potent sells for $70 and has variable costs of $45. The sales mix of the three sets is: Sleek, 50%; Smooth, 30%; and Potent, 20%.

What is the weighted-average unit contribution margin?

Answer 1

Weighted average unit contributIoN = $17

Step-by-step explanation:

Weighted average contribution margin is applicable where a business sells more than one product in a constant mix or proportion. It gives an idea of how much is made on the average as contribution from th sale of a unit.

It is determined as follows

Step 1

Contribution per unit

Contribution per unit = selling price - unit variable cost

Sleek Smooth Potent

Selling price 30 50 70

Variable cost (18) (30) (45)

Contribution ($) 12 20 25

step 2

weighted average unit contribution

= (50%×12) + (30%×20) + (20%×25)

= $17