Grantham Company sells two products,X and Y.For the coming year,Grantham predicts the sale of 5,000 units of X and 10,000 units of Y.The contribution margins of the two products are $5 and $3,respectively.The weighted-average contribution margin would be $5.50.

Question

Quizplus · Accepted Answer

To calculate the weighted-average contribution margin, we need to take into account the proportion of sales of each product:

Weighted-average contribution margin = (contribution margin of X x proportion of sales of X) + (contribution margin of Y x proportion of sales of Y)
Weighted-average contribution margin = ($5 x 0.33) + ($3 x 0.67)
Weighted-average contribution margin = $1.65 + $2.01
Weighted-average contribution margin = $3.66

Therefore, the statement is false. The weighted-average contribution margin is $3.66, not $5.50.

Grantham Company Sells Two Products,X and Y