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

Question

Quizplus · Accepted Answer

The weighted average contribution margin ratio is calculated by dividing the total contribution margin by the total sales revenue. Contribution margin is sales revenue minus variable costs. For Lay Back: $120,000 - 60,000 = 60,000$, and for Easy Rest: $140,000 - 42,000 = 98,000$. Total contribution margin is $60,000 + 98,000 = 158,000$. Total sales revenue is $120,000 + 140,000 = 260,000$. The weighted average contribution margin ratio is $158,000 / 260,000 = 0.6077$ or 60.77%.

Beach Time Produces Two Models of Beach Chairs, Lay Back