Question

Edgewater Enterprises manufactures two products. Information follows:

	Product A			Product B
Sales price	$	14.00		$	17.15
Variable cost per unit	$	6.30		$	7.70
Product mix		40%			60%

Calculate Edgewater’s weighted-average contribution margin per unit. (Round your intermediate calculations and final answer to 2 decimal places.)

Answer 1

Edgewater’s weighted-average contribution margin per unit is $8.75

weighted average contribution margin per unit=contribution per sales mix/number of mix

contribution per unit=sales price-variable cost per unit

for

product A

$14-$6.30=$7.70

product B

$17.15-$7.70=$9.45

product mix is given in a percentage of 40% for product A and 60% for product B, we can take the product mix ratio as 4:6 for the products respectively

so the contribution per sales mix=(4*$7.70)+(6*$9.45)=$87.5

number of mix=4+6=10

weighted average contribution margin per unit=$87.5/10=$8.75