Emily Corporation sells two products: hurricane lamps and flashlights. Hurricane lamps account for 70 percent of the units sold, while the flashlights account for the remaining 30 percent of unit sales. The unit sales price of the lamps is $9.00, and the unit variable cost is $4.00. The unit sales price of the flashlights is $7.00, and the unit variable cost is $3.00. What is the weighted-average contribution margin per unit?

Question

Business

Kaila

19 June, 04:16

Emily Corporation sells two products: hurricane lamps and flashlights. Hurricane lamps account for 70 percent of the units sold, while the flashlights account for the remaining 30 percent of unit sales. The unit sales price of the lamps is $9.00, and the unit variable cost is $4.00. The unit sales price of the flashlights is $7.00, and the unit variable cost is $3.00. What is the weighted-average contribution margin per unit?

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Marisa Edwards · Answer 1

weighted-average contribution margin = $4.7

Explanation:

Giving the following information:

Hurricane lamps account for 70 percent of the units sold, while the flashlights account for the remaining 30 percent of unit sales. The unit sales price of the lamps is $9.00, and the unit variable cost is $4.00. The unit sales price of the flashlights is $7.00, and the unit variable cost is $3.00.

To calculate the weighted-average contribution margin, we need to calculate first the weighted-average selling price and weighted average variable cost for each product.

weighted average selling price = (selling price * weighted sales participation)

weighted average selling price = (0.7*9 + 0.3*7) = $8.4

weighted average variable cost = (variable cost * weighted sales participation)

weighted average variable cost = (0.7*4 + 0.3*3) = 3.7

Now, we can calculate the weighted average contribution margin:

weighted-average contribution margin = 8.4 - 3.7 = $4.7