Question

X Company estimates the following for its two products in 2019:

	Product X	Product Y
Selling price	$13.60	$34.50
Variable cost	$11.30	$26.50
Production [units]	50,000	10,000

Estimated fixed costs in 2019 are $70,000. What is X Company's estimated weighted average contribution margin per unit in 2019?

Answer 1

Calculation of sales Mix ratio	Product X	Product Y	Total
Production (Units)	50000	10000	60000
Sales Mix ratio [(50000/60000)*100]; [(10000/60000)*100]	83.33%	16.67%

X company's weighted average contribution margin per unit
			Particulars	Product X	Product Y
Selling price	$13.60	$34.50
Less: Variable cost	$11.30	$26.50
Contribution Margin per unit (Selling price per unit - Variable cost per unit)	$2.30	$8.00
Sales Mix ratio [(50000/60000)*100]; [(10000/60000)*100]	83.333%	16.667%
Weighted Average contribution margin per unit	$1.92	$1.33
X company's weighted average contribution margin per unit ($1.92+$1.33)	$3.25