Isabellas,Inc.,a local convenience store,sells soft drinks.It sells two large drinks for every small drink.A large drink sells for $3.00 with a variable cost of $0.80.A small drink sells for $1.00 with a variable cost of $0.50.The weighted average contribution margin is ________.(Round any intermediate calculations and your final answer to the nearest cent.)

Question

Quizplus · Accepted Answer

To calculate the weighted average contribution margin, we need to find the contribution margins for both types of drinks, weighted by the proportion they are sold.

For the large drinks, the contribution margin is $3.00 - $0.80 = $2.20.

For the small drinks, the contribution margin is $1.00 - $0.50 = $0.50.

Since the store sells two large drinks for every small drink, the proportion of large drinks sold is 2/3 and the proportion of small drinks sold is 1/3.

So, the weighted average contribution margin is (2/3) x $2.20 + (1/3) x $0.50 = $1.63 per drink.

Therefore, the best choice is C.