Question

Clipper Company sells two types of nail clippers. One focuses on the economy oriented customer and the other aims to satisfy the high-end clientele. The economy clipper cost $3 and has a sales price of $5. The high-end model costs $9 and sales for $12. Fixed costs associated with this product line amount to $35,880. Economy clippers constitute 70 percent of the market with the remaining 30 percent being high-end clippers. Based on this information what is the weighted average contribution margin

Answer 1

2.30

Step-by-step explanation:

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

Particulars Nail Clipper 1 Nail Clipper 2 Total

Selling Price $5 $12

Less: Variable Cost $3 $9

Contribution Margin $2 $3

PV Ratio 40% 25%

($2 ÷ $5) ($3 ÷ $12)

Weights 0.7 0.3

Weighted Average 28.00% 7.50% 35.50%

Weighted average

contribution margin 1.40 0.90 2.30