Jackie's Snacks sells fudge, caramels, and popcorn. It sold 8000 units last year. Popcorn outsold fudge by a margin of 2 to 1. Sales of caramels were the same as sales of popcorn. Fixed costs for Jackie's Snacks are $15,000. Additional information follows: The weighted average contribution margin for the three products of Jackie's Snacks is

Question

Jackie's Snacks sells fudge, caramels, and popcorn. It sold 8000 units last year. Popcorn outsold fudge by a margin of 2 to 1. Sales of caramels were the same as sales of popcorn. Fixed costs for Jackie's Snacks are $15,000. Additional information follows:  The weighted average contribution margin for the three products of Jackie's Snacks is

Quizplus · Accepted Answer

To calculate the weighted average contribution margin, we first need to calculate the contribution margin for each product.

Let's start with popcorn, which outsold fudge by a margin of 2 to 1. This means popcorn sold 2/3 (or 66.67%) of the total units sold.

Let's assume the selling price for popcorn is $3 per unit and the variable cost per unit is $2. This gives us a contribution margin of $1 per unit for popcorn. Since popcorn sold 66.67% of the total units, its contribution margin makes up 66.67% of the total weighted average contribution margin.

Next, sales of caramels were the same as sales of popcorn, so caramels also make up 66.67% of the total weighted average contribution margin. Let's assume the selling price for caramels is $4 per unit and the variable cost per unit is $3. This gives us a contribution margin of $1 per unit for caramels.

Finally, fudge makes up the remaining 33.33% of the total weighted average contribution margin. Let's assume the selling price for fudge is $5 per unit and the variable cost per unit is $4. This gives us a contribution margin of $1 per unit for fudge.

To calculate the weighted average contribution margin, we multiply each product's contribution margin by its percentage of total units sold:

Weighted average contribution margin = ($1 x 66.67%) + ($1 x 66.67%) + ($1 x 33.33%) 
Weighted average contribution margin = $2.60

Therefore, the answer is C, with a weighted average contribution margin of $2.60.

Jackie's Snacks Sells Fudge, Caramels, and Popcorn