Question

company X sells two products, sales of product A are 1000 units at $10 per unit and sales of product B are 3000 units at $15 per unit. the contribution margin per unit of product A is $4 and of product B is $2. What is the contribution margin per unit of the sales mix?

Answer 1

Sales Value – Product A = (1,000 Units x $10) = $10,000

Sales Value – Product B = (3,000 Units x $15) = $45,000

Total Sales Value = ($10,000 + 45,000) = $55,000

Sales Mix – Product A = ($10,000 / 55,000) x 100 = 18.18%

Sales Mix – Product B = ($45,000 / 55,000) x 100 = 81.82%

Contribution margin per unit of the sales mix = (Contribution per unit Product-A x Sales Mix Product-A) + (Contribution per unit Product-B x Sales Mix Product-B)

= ($4 x 0.1818) + ($2 x 0.8182)

= $0.73 + $1.64

= $2.36 per unit.

“Therefore, Contribution margin per unit of the sales mix = $2.36 per unit”