Estes Company sells two types of computer chips.The sales mix is 30% (Chip A)and 70% (Chip B).Chip A has variable costs per unit of $20 and a selling price of $40.Chip B has variable costs per unit of $25 and a selling price of $55.The weighted-average unit contribution margin for Estes is

Question

Quizplus · Accepted Answer

To calculate the weighted-average unit contribution margin, we need to multiply the contribution margin of each product by its percentage in the sales mix, and then add them up.

Contribution margin for Chip A = Selling price - Variable cost = $40 - $20 = $20 
Contribution margin for Chip B = Selling price - Variable cost = $55 - $25 = $30

Weighted-average unit contribution margin = (0.3 x $20) + (0.7 x $30) = $6 + $21 = $27

Therefore, the best choice is C, with a weighted-average unit contribution margin of $27.

Estes Company Sells Two Types of Computer Chips