Reynold Coffee sells three large coffees for every two small ones.A small coffee sells for $4 per cup,with a variable cost of $2 per cup.A large coffee sells for $5 per cup with a variable cost of $3 per cup.What is the weighted-average contribution margin?

Question

Quizplus · Accepted Answer

The contribution margin for a small coffee is $2 ($4 - $2) and for a large coffee is $2 ($5 - $3). The sales mix is 3 large for every 2 small, so the weighted-average contribution margin is [(2 small * $2) + (3 large * $2)] / (2 + 3) = $2.00.

Reynold Coffee Sells Three Large Coffees for Every Two Small