Geneva Bottled Water Co. is assembling a weighted average contribution margin chart to better analyze differences between sales on 36 oz. and the 20 oz. bottled water. The sales price per unit of the 36 oz. bottled water is $3.69 while the sales price per unit of the 20 oz. bottled water is $1.08. The contribution margin per unit for the 36 oz. bottle is $2.40 and the contribution margin of the 20 oz. bottle is $0.12. The 20 oz. bottle outsells the 36 oz. bottle by a 5:1 relationship. What is the weighted average contribution margin per unit on these two products?

Question

Quizplus · Accepted Answer

The weighted average contribution margin per unit is calculated by taking the sum of the products of each item's contribution margin and its proportion of total sales. For the 36 oz. bottle, the contribution margin is $2.40, and for the 20 oz. bottle, it is $0.12. Given the 5:1 sales ratio in favor of the 20 oz. bottle, the calculation is as follows: [(1 * $2.40) + (5 * $0.12)] / (1 + 5) = ($2.40 + $0.60) / 6 = $3.00 / 6 = $0.50.