Figure 4-5. Standlar Company makes wireless speakers.The standard model price is $360 and variable expenses are $210.The deluxe model price is $500 and variable expenses are $300.The superior model price is $1,600 and variable expense per unit is $600.Total fixed expenses are $300,000.Generally,Standlar sells 8 standard models and 4 deluxe models for every superior model sold.
Using the sales mix stated in the facts from Figure 4-5 to form a package,what is the total package contribution margin?

Question

Quizplus · Accepted Answer

First, we need to calculate the contribution margin per unit for each model:

- Standard model: $360 - $210 = $150
- Deluxe model: $500 - $300 = $200
- Superior model: $1600 - $600 = $1000

Next, we need to calculate the sales mix ratio based on the information given:

- 8 standard models : 4 deluxe models : 1 superior model
- This can also be expressed as 8:4:1 or 8/13 : 4/13 : 1/13

Now we can calculate the weighted average contribution margin per unit:

($150 x 8/13) + ($200 x 4/13) + ($1000 x 1/13) = $115.38

Finally, we calculate the total package contribution margin by multiplying the weighted average contribution margin by the total number of units in the package:

($115.38 per unit) x (8 standard models + 4 deluxe models + 1 superior model) = $3,000

Therefore, the best choice is C, because it represents the total package contribution margin for the given sales mix.