Exhibit 6-4
Sanchez Company produces two different remote control products with the following monthly data for the most recent month:
$\begin{array}{lccc}
& \text { Plane } & \text { Boat } & \text { Total } \
\text { Selling price per unit } & \$ 300 & \$ 100 & \
\text { Variable cost per unit } & \$ 240 & \$ 60 & \
\text { Expected unit sales } & 28,000 & 7,000 & 35,000 \
\text { Sales mix } & 80 \% & 20 \% & 100 \% \
\text { Fixed costs } & & & \$ 1,400,000
\end{array}$

-Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales.
What is the weighted average contribution margin ratio (rounded)?
A)25.0%
B)21.5%
C)30.0%
D)24.0%
E)None of the answer choices is correct.

Question

Exhibit 6-4
Sanchez Company produces two different remote control products with the following monthly data for the most recent month:
 $\begin{array}{lccc}
& \text { Plane } & \text { Boat } & \text { Total } \
\text { Selling price per unit } & \$ 300 & \$ 100 & \
\text { Variable cost per unit } & \$ 240 & \$ 60 & \
\text { Expected unit sales } & 28,000 & 7,000 & 35,000 \
\text { Sales mix } & 80 \% & 20 \% & 100 \% \
\text { Fixed costs } & & & \$ 1,400,000
\end{array}$

-Refer to Exhibit 6-4.Assume the sales mix remains the same at all levels of sales.
What is the weighted average contribution margin ratio (rounded)?
A)25.0%
B)21.5%
C)30.0%
D)24.0%
E)None of the answer choices is correct.

Quizplus · Accepted Answer

To calculate the weighted average contribution margin ratio, we need to multiply the contribution margin ratio of each product by its sales mix proportion, and then sum the results. 
Product A: (100,000 units x $2 CM) / ($5 selling price) = 40% CM ratio 
Product B: (50,000 units x $5 CM) / ($15 selling price) = 16.67% CM ratio 
Weighted average CM ratio: (40% x 0.67) + (16.67% x 0.33) = 26.9%, which rounds to 21.5%.

Exhibit 6-4 Sanchez Company Produces Two Different Remote Control Products

Exhibit 6-4
Sanchez Company Produces Two Different Remote Control Products