A firm sells two products, Regular and Ultra. For every unit of Regular the firm sells, two units of Ultra are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow. The contribution margin per composite unit is: Product
$\begin{array} { l r r r }
& \text { Unit Sales } & \text { Variable Cost Per } \
\text { Product } & \text { Price } & \text { Unit } & \
\text { Regular } & \$ 20 & & \$ 8 \
\text { Ultra } & 24 & & 4
\end{array}$
A) $52.
B) $32.
C) $20.
D) $12.
E) $44.

Question

A firm sells two products, Regular and Ultra. For every unit of Regular the firm sells, two units of Ultra are sold. The firm's total fixed costs are $1,612,000. Selling prices and cost information for both products follow. The contribution margin per composite unit is: Product
$\begin{array} { l r r r } 
& \text { Unit Sales } & \text { Variable Cost Per } \
\text { Product } & \text { Price } & \text { Unit } & \
\text { Regular } & \$ 20 & & \$ 8 \
\text { Ultra } & 24 & & 4
\end{array}$
A) $52.
B) $32.
C) $20.
D) $12.
E) $44.

Quizplus · Accepted Answer

The contribution margin per composite unit is the sum of the contribution margins of each product, weighted by their respective unit sales. For Regular, the contribution margin is $20 - $8 = $12, and for Ultra, the contribution margin is $24 - $4 = $20. Since two units of Ultra are sold for every unit of Regular, the weighted average contribution margin is $12 + (2 * $20) = $52.

A Firm Sells Two Products, Regular and Ultra A) $52 B) $32

A Firm Sells Two Products, Regular and Ultra A) $52
B) $32