Question

ABC Corporation sells two types of computer hard drives. The sales mix is 40% (Q-Drive) and 60% (Q-Drive Plus). Q-Drive has variable costs per unit of $83.31 and a selling price of $125.53. Q-Drive Plus has variable costs per unit of $160.34 and a selling price of $231.43. The weighted-average unit contribution margin for ABC is:

Answer 1

$59.54 per unit.

Step-by-step explanation:

We will need to first compute the contribution margin per unit for each drive.

Contribution margin per unit = Selling price per unit - Variable expenses per unit .

Therefore for Q-drive,

= $125.53 - $83.31

= $42.22

For Q-drive plus

= $231.43 - $160.34

= $71.09

Weighted average unit contribution margin ratio

= Weighted sales mix × Contribution margin + Weighted sales mix × Contribution margin

= 40% × $42.22 + 60% × $71.09

= $16.888 + $42.654

= $59.54 per unit