Question

Larry Company makes and sells 2 models of​ dishwashers, Model ABC and Model XYZ. For every 2 Model ABC​ sold, 3 Model XYZ are sold. The following information is also​ provided: Model ABC Model XYZ Sales per unit $ 490 $ 730 Variable Cost per unit ​$250 ​$300 CM per unit $ 240 $ 430 What is the weighted average contribution​ margin?

Answer 1

$354

Step-by-step explanation:

The computation of the weighted average contribution margin is shown below:

= (Contribution margin per unit for Model ABC × Sales mix for model ABC) + (Contribution margin per unit for Model XYZ × Sales mix for model XYZ) ÷ (Sales mix for model ABC + Sales mix for model XYZ)

= ($240 × 2 models + $430 × 3 models) ÷ (2 models + 3 models)

= ($480 + $1,290) ÷ (5 models)

= $354

We simply applied the above formula