Slamburger's sells four cheeseburgers for every two regular hamburgers. A cheeseburger sells for $2.75 with a variable cost of $2.25. A regular hamburger sells for $2 with a variable cost of $0.50. What is the weighted average contribution margin?

Question

Quizplus · Accepted Answer

To find the weighted average contribution margin, we need to first find the contribution margin for both the cheeseburger and the regular hamburger.

Contribution margin for cheeseburger = selling price - variable cost = $2.75 - $2.25 = $0.50
Contribution margin for regular hamburger = selling price - variable cost = $2 - $0.50 = $1.50

Next, we need to calculate the weight of each type of burger in the sales mix. We know that Slamburger's sells four cheeseburgers for every two regular hamburgers, which means the sales mix is 4:2, or 2:1. Therefore, the weight of the cheeseburger is 2/3 and the weight of the regular hamburger is 1/3.

Finally, we can calculate the weighted average contribution margin:
Weighted average contribution margin = (contribution margin for cheeseburger x weight of cheeseburger) + (contribution margin for regular hamburger x weight of regular hamburger)
= ($0.50 x 2/3) + ($1.50 x 1/3)
= $0.33 + $0.50
= $0.83

Therefore, the best choice is B, with a weighted average contribution margin of $0.83, which means for every dollar of sales revenue, the company makes $0.83 in contribution margin.

Slamburger's Sells Four Cheeseburgers for Every Two Regular Hamburgers