Question

X Company estimates the following for its only two products for 2020 - A and B:

	A	B
Unit sales	6,350	680
Selling price	$10.90	$33.70
Variable cost	$5.80	$25.10

Total fixed costs in 2020 are expected to be $16,800. What is the expected weighted average contribution margin RATE in 2020 (rounded to two decimal places)?

Answer 1

contribution magrin rate = contribution margin/sales

when two products are sold weights are given tp product on the basis of sales mix.

weighted contribution margin

Products	UNITS	WEIGHT [A]	CONTRIBUTION MARGIN[SALES-VARIABLE COST] [B]	WEIGHTED AVERAGE CONRIBUTION MARGIN [AxB]	Sales price [C]	WEIGHTED AVERAGE SALES [AXC]
A	6350	0.9032[6350/7,030]	$5.1[$10.90-5.80]	4.60632[5.1*0.9032]	$10.90	$9.84488[$10.90*0.9032]
B	680	0.09672[680/7030]	$8.6[$33.70-25.10]	0.831792	$33.70	$3.259464[$33.70*0.09672]
tOTAL	7,030	1		5.438112		$13.104344

Weighted averag CM rate = Weighted average contribution margin/weighted average sales

=$5.438112/13.104344

=0.41 [+-0.01]

Pleas eupvote if you find this helpful.Incase of query please comment.