Fiesta Supply Company compiled the following data in order to assess the weighted average contribution margin per unit of two of the company's best-selling party items; the dome tent and the portable gazebo. 1. What is the contribution margin of the dome tent?
2) What is the weighted-average contribution margin per unit?

Question

Quizplus · Accepted Answer

1) The contribution margin of the dome tent can be calculated by subtracting the variable cost per unit from the selling price per unit:
Contribution margin = Selling price per unit - Variable cost per unit
Contribution margin = $1200 - $240 = $960

2) The weighted-average contribution margin per unit can be calculated by taking the weighted average of the contribution margin for each item, based on the proportion of sales:
Weighted-average contribution margin per unit = [(Contribution margin of dome tent x Proportion of sales) + (Contribution margin of portable gazebo x Proportion of sales)]
Weighted-average contribution margin per unit = [($960 x 0.6) + ($630 x 0.4)] = $580 + $252 = $832
Therefore, the best choice is A: $960 and $293.33.

Fiesta Supply Company Compiled the Following Data in Order to Assess