Question

Given: Kraft has asked Ansley and Bailey to consider making Extra Attack Brownies and Nutty Attack Brownies, in addition to Chocolate Attack Brownies. The selling price to Yumminess would be $12 and $14.50 per tin, respectively, compared to the original $10 for Chocolate Attack Brownies. In addition to the current fixed common cost of $79,000, you have figured the additional costs to manufacture each new recipe. For 50,000 tins of Extra Attack Brownies, additional variable costs would be $75,000. For 20,000 tins of Nutty Attack Brownies, additional variable costs would be $100,000. Keep in mind that contribution margin for Chocolate Attach Brownies per tin is $1.995.  

If Ansley and Bailey sold 100,000 tins of Chocolate Attack Brownies, 70,000 tins of Extra Attack Brownies, and 30,000 tins of Nutty Attack Brownies to Yumminess, what would be the weighted-average contribution margin per tin? Please explain.  

Answer 1

Variable cost of cholcate brownie= selling price-contribution margin
=10-1.995=8.005
for 50000 tins of extra brownie the total variable costs=(8.005*50000)+(75000)=475250
Per unit variable cots=475250/50000=9.505
CM =12-9.505=2.495
for 20000 tins of nutty brownie the total variable costs=(8.005*20000)+(100000)=260100
Per unit variable cots=260100/20000=13.005
CM =14.5-13.005=1.495
Weighted average CM per tin=((100000*1.995)+(70000*2.495)+(30000*1.495))/(100000+70000+30000)
=2.095