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**

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