Nesto sells two products: X and Y. The contribution margin ratio for X is 40 per cent and for Y is 50 per cent. If the proportion of sales of X decreases, what will happen to the weighted average contribution margin?

Question

Quizplus · Accepted Answer

Since product Y has a higher contribution margin ratio (50%) compared to product X (40%), decreasing the proportion of sales of X and presumably increasing the proportion of sales of Y would increase the overall weighted average contribution margin.

Nesto Sells Two Products: X and Y