Geneva Bottled Water Co. is assembling a weighted average contribution margin ch

Question

Geneva Bottled Water Co. is assembling a weighted average contribution margin chart to better analyze differences between sales on 36 oz. and the 20-oz. bottled water. The sales price per unit of the 36-oz. bottled water is $ 3.92 while the sales price per unit of the 20-oz. bottled water is $ 1.14. The contribution margin per unit for the 36-oz. bottle is $ 2.02 and the contribution margin of the 20-oz. bottle is $ 0.44. The 20-oz. bottle outsells the 36-oz. bottle by a 5:1 relationship. What is the weighted average contribution margin per unit on these two products? (Round the final answer to the nearest cent.) a. $ 2.11 b. $ 1.76 c. $ 4.22 d. $ 0.70

Explanation / Answer

Solution:

Contribution margin per unit of 20-Oz bottle = $0.44

Contribution margin per unit of 36-Oz bottle = $2.02

Relationship of 20Oz and 36Oz sales units = 5:1

Weighted average contribution margin per unit of these tow products = $0.44 * 5/6 + $2.02*1/6 = $0.70

Hence option d is correct.

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