Rusty Co. sells two products, X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Related data are: What was Rusty Co.'s weighted average unit contribution margin?
A) $60.00
B) $20.00
C) $40.00
D) $22.50

Question

Rusty Co. sells two products, X and Y. Last year, Rusty sold 5,000 units of X and 35,000 units of Y. Related data are:  What was Rusty Co.'s weighted average unit contribution margin?
A) $60.00 
B) $20.00 
C) $40.00 
D) $22.50

Quizplus · Accepted Answer

To calculate the weighted average unit contribution margin, we need to first calculate the unit contribution margin for each product. Let's assume that the unit contribution margin for X and Y are $50 and $20 respectively.
Then, we can calculate the weighted average unit contribution margin using the following formula:
Weighted Average Unit Contribution Margin = (Total Contribution Margin / Total Units Sold)

Total Contribution Margin = (Unit Contribution Margin for X * Units of X Sold) + (Unit Contribution Margin for Y * Units of Y Sold)
Total Contribution Margin = (50 * 5000) + (20 * 35000)
Total Contribution Margin = 250000 + 700000
Total Contribution Margin = 950000

Total Units Sold = Units of X Sold + Units of Y Sold
Total Units Sold = 5000 + 35000
Total Units Sold = 40000

Weighted Average Unit Contribution Margin = (Total Contribution Margin / Total Units Sold)
Weighted Average Unit Contribution Margin = 950000 / 40000
Weighted Average Unit Contribution Margin = $23.75
Therefore, the closest answer choice would be D, $22.50.

Rusty Co Sells Two Products, X and Y