Beach Time produces two models of beach chairs, Lay Back and Easy Rest. Information regarding these products for May follows: $\begin{array}{lrr}&\text { Lay Back } &\text { Easy Rest }\
\text { Number of units }&6,000&14,000\
\text { Sales revenue } & \$ 120,000 & \$ 140,000 \
\text { Fixed costs } & 24,000 & 50,000 \
\text { Variable costs } & 60,000 & 42,000 \
\text { Net Income } & \$ 36,000 & \$ 48,000 \
\text { Selling price per unit } & \$ 20 & \$ 10
\end{array}$ How much is Beach Time's weighted average contribution margin ratio?

Question

Quizplus · Accepted Answer

The contribution margin for each product is calculated as (Sales Revenue - Variable Costs). For Lay Back: ($120,000 - $60,000) = $60,000. For Easy Rest: ($140,000 - $42,000) = $98,000. The total sales revenue is $260,000. The weighted average contribution margin ratio is calculated as (Total Contribution Margin / Total Sales Revenue) = ($60,000 + $98,000) / $260,000 = 60.77%.

Beach Time Produces Two Models of Beach Chairs, Lay Back