Question

Shugart sells two products. Product A sells for $77 with variable costs of $32. Product B sells for $164 with variable costs of $52. The sales mix is 51% for products A while product B's is the remainder (or 100% less 51. What is the weighted average unit contribution margin rounding to the nearest penny? As always, do not use $ signs.

Answer 1

Answer: 77.83 dollars.

Step-by-step explanation:

Contribution margin is known as the difference between the Selling price and variable costs.

So in the above scenario,

Product A Contribution Margin = 77 - 32

= $45

Product B Contribution Margin = 164 - 52

= $112

Now we are to calculate the Weighted Average. To do that we multiply the Contribution margins by their proportion of the sales mix and then add them up.

Product A proportion = 51%

Product B proportion = 49%

Weighted Average = 0.51(45) + 0.49(112)

= 77.83

The weighted average unit contribution margin is 77.83 dollars.

If you need any clarification do comment.