Kelly Co. incurs $465,000 in fixed costs while producing three products with the following characteristics: $$\begin{array} { | l | c | c | c | }
\hline \text { Product } & \text { Sales Mix (units) } & \begin{array} { c }
\text { Contribution } \
\text { Mar gin per unit }
\end{array} & \begin{array} { c }
\text { Contribution } \
\text { Margin Ratin }
\end{array} \
\hline \text { Srnall } & 5 & \$ 300 & 25 \% \
\hline \text { Medium } & 3 & \$ 200 & 30 \% \
\hline \text { Larpe } & 2 & \$ 500 & 40 \% \
\hline
\end{array}$$ What is the selling price of Small?
A) $1,200
B) $400
C) $800
D) $1,250

Question

Kelly Co. incurs $465,000 in fixed costs while producing three products with the following characteristics: $$\begin{array} { | l | c | c | c | } 
\hline \text { Product } & \text { Sales Mix (units) } & \begin{array} { c } 
\text { Contribution } \
\text { Mar gin per unit }
\end{array} & \begin{array} { c } 
\text { Contribution } \
\text { Margin Ratin }
\end{array} \
\hline \text { Srnall } & 5 & \$ 300 & 25 \% \
\hline \text { Medium } & 3 & \$ 200 & 30 \% \
\hline \text { Larpe } & 2 & \$ 500 & 40 \% \
\hline
\end{array}$$ What is the selling price of Small?
A) $1,200
B) $400
C) $800
D) $1,250

Quizplus · Accepted Answer

The contribution margin ratio for Small is 25%, meaning the contribution margin ($300) is 25% of the selling price. Therefore, the selling price is $300 / 0.25 = $1,200.

Kelly Co Incurs $465,000 in Fixed Costs While Producing Three Products