Question

Question 3 Coronado Corporation sells three different models of a mosquito "zapper." Model A12 sells for $54 and has variable costs of $39. Model B22 sells for $105 and has variable costs of $73. Model C124 sells for $411 and has variable costs of $309. The sales mix of the three models is A12, 59%; B22, 30%; and C124, 11%. What is the weighted average unit contribution margin? (Round answer to 2 decimal places, e.g. 15.50.) Weighted-Average Unit Contribution Margin $

Answer 1

First we will calculate the contribution margin for model as per below:

Contribution margin = Selling price per unit - Variable cost per unit

For Model A12:

Contribution margin = $54 - $39 = $15 per unit

For Model B22:

Contribution margin = $105 - $73 = $32 per unit

For Model C124:

Contribution margin = $411 - $309 = $102 per unit

Now, we will calculate the weighted average contribution margin as per below:

Weighted average unit contribution margin = w1 *c1 + w2*c2 + w3*c3

where, w1,w2, and w3 are the weights of the three models respectively and c1,c2 and c3 are the contribution margins of the products.

Putting the values in the above formula, we get,

Weighted average unit contribution margin = (59% * $15) + (30% * $32) + (11% * $102)

Weighted average unit contribution margin = $8.85 + $9.6 + $11.22 = $29.67