Gloria's Bakery sells three large muffins for every two small ones.A small muffin sells for $6 with a variable cost of $2.A large muffin sells for $8 with a variable cost of $2.50.What is the weighted-average contribution margin? (Round your intermediate calculations to one decimal place.)
A) $4.00 per muffin
B) $4.75 per muffin
C) $5.50 per muffin
D) $4.90 per muffin

Question

Quizplus · Accepted Answer

We can use the weighted-average contribution margin formula:
[(number of small muffins sold/total number of muffins sold) × (contribution margin per small muffin)] + [(number of large muffins sold/total number of muffins sold) × (contribution margin per large muffin)]
= [(2/5) × (6 - 2)] + [(3/5) × (8 - 2.5)]
= (2/5) × 4 + (3/5) × 5.5
= 1.6 + 3.3
= 4.9
Therefore, the weighted-average contribution margin is $4.90 per muffin.

The best choice is to increase the sales of large muffins as they have a higher contribution margin.

Gloria's Bakery Sells Three Large Muffins for Every Two Small