ZTL Corporation produces three products. Cost, price, and volume data is shown below: Total Fixed costs $2,400
Tax rate 40%
Picture Candle CD
Holders Holders Holders
Normal volume 300 150 200
Price per unit $5 $7 $10
Variable cost per unit 2 3 4
The weighted average contribution margin per unit, rounded to the nearest cent, is:

Question

Quizplus · Accepted Answer

The contribution margin per unit for each product can be calculated as follows:
- Picture Candle Holders: $5 - $2 = $3
- CD Holders: $7 - $3 = $4
- Holders: $10 - $4 = $6
To calculate the weighted average contribution margin per unit, we need to determine the proportion of each product's sales to the total sales mix. This can be done by dividing each product's normal volume by the total normal volume:
- Picture Candle Holders: 300 / (300 + 150 + 200) = 0.5
- CD Holders: 150 / (300 + 150 + 200) = 0.25
- Holders: 200 / (300 + 150 + 200) = 0.25
The weighted average contribution margin per unit is then calculated as the weighted sum of each product's contribution margin per unit:
(0.5 * $3) + (0.25 * $4) + (0.25 * $6) = $1.50 + $1.00 + $1.50 = $4.00
Therefore, the best choice(s) is (C) as it is the weighted average contribution margin per unit of all the products.

ZTL Corporation Produces Three Products