Maxie Pty Ltd makes and sells two types of shoes,Plain and Fancy.Product data is as follows:
Sixty per cent of the sales in units are Plain and annual fixed expenses are $45 000.Determine the weighted average unit contribution margin.

Question

Quizplus · Accepted Answer

To calculate the weighted average unit contribution margin, we need to first find the contribution margin for each type of shoe. Let's assume the unit selling prices and unit variable costs for Plain and Fancy shoes are:

Plain: Selling price = $30, Variable cost = $15
Fancy: Selling price = $50, Variable cost = $25

Contribution margin per unit for Plain = Selling price - Variable cost = $30 - $15 = $15
Contribution margin per unit for Fancy = Selling price - Variable cost = $50 - $25 = $25

Next, we need to calculate the weighted average of these two contribution margins based on the sales mix of 60% Plain and 40% Fancy:

Weighted average unit contribution margin = (Contribution margin per unit for Plain x Sales mix for Plain) + (Contribution margin per unit for Fancy x Sales mix for Fancy)
= ($15 x 0.6) + ($25 x 0.4)
= $9.00

Therefore, the best choice is C, $9.00.

Maxie Pty Ltd Makes and Sells Two Types of Shoes,Plain