Managerial Accounting Quiz: Weighted Average Contribution Margin
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Weighted Average Contribution MarginQuestion 1 of 20

A company sells two products, Alpha and Beta. Product Alpha has a selling price of $100 and variable costs of $60 per unit. Product Beta has a selling price of $150 and variable costs of $90 per unit. In the most recent period, the company sold 6,000 units of Alpha and 4,000 units of Beta. Total fixed costs for the period were $200,000.

Based on the sales mix from the most recent period, what is the company's weighted-average contribution margin per unit?

$48.00
$50.00
$52.00
$480,000
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Managerial Accounting Quiz

Managerial Accounting Quiz: Weighted Average Contribution Margin

Practice Weighted Average Contribution Margin in Managerial Accounting with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Weighted Average Contribution Margin, giving you a quick way to practice the rules, question types, and explanations that matter most for Managerial Accounting.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

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Question 1

A company sells two products, Alpha and Beta. Product Alpha has a selling price of $100 and variable costs of $60 per unit. Product Beta has a selling price of $150 and variable costs of $90 per unit. In the most recent period, the company sold 6,000 units of Alpha and 4,000 units of Beta. Total fixed costs for the period were $200,000.

Based on the sales mix from the most recent period, what is the company's weighted-average contribution margin per unit?

  1. $48.00 (correct answer)
  2. $50.00
  3. $52.00
  4. $480,000
Explanation: First, calculate the contribution margin (CM) per unit for each product. CM = Selling Price - Variable Costs. CM for Alpha = $100 - $60 = $40. CM for Beta = $150 - $90 = 60.Next,determinethesalesmixbasedonunitssold.Totalunits=6,000(Alpha)+4,000(Beta)=10,000units.Thesalesmixis6060. Next, determine the sales mix based on units sold. Total units = 6,000 (Alpha) + 4,000 (Beta) = 10,000 units. The sales mix is 60% for Alpha (6,000 / 10,000) and 40% for Beta (4,000 / 10,000). The weighted-average contribution margin (WACM) is calculated as: WACM = (CM_Alpha × Mix_Alpha) + (CM_Beta × Mix_Beta) = (40 × 0.60) + ($60 × 0.40) = $24 + $24 = 48.00.DistractorB(48.00. Distractor B (50) represents a simple average of the two contribution margins ((40+40+60)/2), which is also what one would get by incorrectly using the revenue mix (both products generated 600,000inrevenue,a50/50mix).DistractorC(600,000 in revenue, a 50/50 mix). Distractor C (52) results from incorrectly swapping the sales mix percentages. Distractor D ($480,000) is the total contribution margin, not the per-unit average.

Question 2

Precision Tools Inc. sells two models of a power drill: a Standard model and a Deluxe model. The company's typical sales mix is 3 Standard models for every 2 Deluxe models sold. The contribution margin for a Standard model is $25 per unit. For the upcoming year, the company projects a weighted-average contribution margin of $31 per unit across both models.

Given this information, what must be the contribution margin per unit for the Deluxe model?

  1. $40.00 (correct answer)
  2. $35.00
  3. $37.00
  4. $26.67
Explanation: The sales mix of 3 Standard to 2 Deluxe means there are 5 total 'parts' in the mix. The sales mix percentage for Standard is 3/5 = 60%, and for Deluxe is 2/5 = 40%. Let CM_Deluxe be the unknown contribution margin. The formula for the weighted-average contribution margin (WACM) is: $31 = (CM_Standard × Mix_Standard) + (CM_Deluxe × Mix_Deluxe). Plugging in the known values: 31=(31 = (25 × 0.60) + (CM_Deluxe × 0.40). This simplifies to $31 = $15 + 0.40 × CM_Deluxe. Solving for CM_Deluxe: $16 = 0.40 × CM_Deluxe, so CM_Deluxe = $16 / 0.40 = 40.00.DistractorB(40.00. Distractor B (35) results from incorrectly inverting the sales mix weights (using 40% for Standard and 60% for Deluxe). Distractor C ($37) incorrectly assumes a simple unweighted average, where if one is 6belowtheaverage(6 below the average (31-$25), the other must be 6above(6 above (31+6).DistractorD(6). Distractor D (26.67) results from an algebraic error, dividing $16 by 0.60 instead of 0.40.

Question 3

A company manufactures and sells Product X and Product Y. Product X has a contribution margin of $120 per unit, and Product Y has a contribution margin of $80 per unit. The company's current sales mix is 1 unit of Product X for every 3 units of Product Y. A new marketing campaign is expected to shift the sales mix to 2 units of Product X for every 2 units of Product Y.

If the marketing campaign successfully shifts the sales mix as expected, what will be the change in the company's weighted-average contribution margin per unit?

  1. An increase of $10 (correct answer)
  2. An increase of $100
  3. A decrease of $10
  4. An increase of $6.67
Explanation: First, calculate the original WACM. The mix is 1:3, meaning 1/4 of units are X and 3/4 are Y. Original WACM = (120×0.25)+(120 × 0.25) + (80 × 0.75) = $30 + $60 = 90.Next,calculatethenewWACM.Thenewmixis2:2(or1:1),meaning1/2ofunitsareXand1/2areY.NewWACM=(90. Next, calculate the new WACM. The new mix is 2:2 (or 1:1), meaning 1/2 of units are X and 1/2 are Y. New WACM = (120 × 0.50) + ($80 × 0.50) = $60 + $40 = $100. The change is the new WACM minus the original WACM: $100 - $90 = 10increase.DistractorB(10 increase. Distractor B (100) is the new WACM, but not the change. Distractor C (-10)isasignerror.DistractorD(10) is a sign error. Distractor D (6.67) results from incorrectly calculating the original sales mix as 1/3 for X and 2/3 for Y, leading to an incorrect original WACM of $93.33 and a change of $6.67.

Question 4

Fusion Electronics sells three products: the Spark, the Bolt, and the Amp. Last year's sales and cost data are as follows: Spark: 10,000 units sold, total revenue of $800,000, total variable costs of $500,000. Bolt: 6,000 units sold, total revenue of $900,000, total variable costs of $600,000. Amp: 4,000 units sold, total revenue of $1,200,000, total variable costs of $900,000. Total fixed costs for the company were $1,000,000.

What was Fusion Electronics' weighted-average contribution margin per unit last year?

  1. $45.00 (correct answer)
  2. $51.67
  3. $50.00
  4. $42.50
Explanation: First, calculate the contribution margin (CM) for each product. CM_Spark = $800,000 - $500,000 = $300,000. CM_Bolt = $900,000 - $600,000 = $300,000. CM_Amp = $1,200,000 - $900,000 = $300,000. Total contribution margin = $300,000 + $300,000 + $300,000 = $900,000. Total units sold = 10,000 + 6,000 + 4,000 = 20,000 units. Weighted-average contribution margin per unit = $900,000 ÷ 20,000 = 45.00.DistractorB(45.00. Distractor B (51.67) is the simple average of the individual per-unit CMs: ($30 + $50 + 75)÷3.DistractorC(75) ÷ 3. Distractor C (50.00) represents an error in calculation. Distractor D ($42.50) results from excluding one product from the calculation.

Question 5

A company sells two products, High-Margin and Low-Margin. The contribution margin for the High-Margin product is significantly greater than for the Low-Margin product. Over the past year, the company's overall weighted-average contribution margin per unit has increased, although the selling prices, variable costs per unit, and total units sold for both products have remained constant.

Which of the following is the most likely cause of the increase in the weighted-average contribution margin per unit?

  1. The proportion of High-Margin products in the sales mix has increased. (correct answer)
  2. Total fixed costs have decreased during the year.
  3. The proportion of Low-Margin products in the sales mix has increased.
  4. The total number of units sold has increased, leading to economies of scale.
Explanation: The weighted-average contribution margin (WACM) is an average of the individual product contribution margins, weighted by their respective proportions in the sales mix. If selling prices and variable costs per unit are constant, the individual contribution margins are also constant. Therefore, the only way for the WACM to change is for the weights (the sales mix) to change. An increase in the WACM indicates that a higher proportion of products with a higher contribution margin are being sold. Distractor B is incorrect because fixed costs do not affect the contribution margin. Distractor C would cause the WACM to decrease. Distractor D is incorrect because the problem states total units sold remained constant; furthermore, economies of scale typically affect fixed or variable costs, which were also stated to be constant.

Question 6

A beverage company sells a 'variety pack' that contains 3 cans of soda and 2 cans of seltzer, which reflects its overall sales mix. The contribution margin is $0.50 per can of soda and $0.30 per can of seltzer. Fixed costs are $50,000 per month.

What is the company's weighted-average contribution margin per can sold?

  1. $0.40
  2. $0.42 (correct answer)
  3. $2.10
  4. $0.80
Explanation: The sales mix is 3 soda to 2 seltzer, for a total of 5 cans in the mix. The mix percentage for soda is 3/5 = 60%, and for seltzer is 2/5 = 40%. The weighted-average contribution margin (WACM) per can is calculated as: WACM = (CM_soda × Mix_soda) + (CM_seltzer × Mix_seltzer) = (0.50×0.60)+(0.50 × 0.60) + (0.30 × 0.40) = $0.30 + $0.12 = 0.42.DistractorB(0.42. Distractor B (0.40) is the simple average of the two contribution margins. Distractor C ($2.10) is the total contribution margin for the entire variety pack (3 × $0.50 + 2 × $0.30 = $1.50 + 0.60),nottheweightedaveragepercan.DistractorD(0.60), not the weighted average per can. Distractor D (0.80) is the sum of the two per-unit contribution margins, ignoring weighting.

Question 7

Office Solutions Inc. sells ergonomic chairs and desks. For the year, the company reported total sales revenue of $2,500,000 and a total contribution margin of $1,000,000. The company sold 8,000 chairs and 2,000 desks. The company's tax rate is 25% and total fixed costs were $600,000.

What is the weighted-average contribution margin per unit sold?

  1. 40.0%
  2. $400.00
  3. $100.00 (correct answer)
  4. $75.00
Explanation: The weighted-average contribution margin (WACM) per unit can be calculated by dividing the total contribution margin by the total number of units sold. The extraneous information includes total sales revenue, the tax rate, and fixed costs. Total units sold = 8,000 chairs + 2,000 desks = 10,000 units. Total contribution margin = $1,000,000. WACM per unit = $1,000,000 / 10,000 units = 100.00perunit.DistractorB(100.00 per unit. Distractor B (400) is the after-tax operating income ($1,000,000 - 600,000).DistractorC(40.0600,000). Distractor C (40.0%) is the company's overall contribution margin ratio (1,000,000 / 2,500,000).DistractorD(2,500,000). Distractor D (75) is the after-tax contribution margin per unit (a meaningless concept), calculated as $100 * (1-0.25).

Question 8

A company sells three products: X, Y, and Z. The sales mix in units is 5:3:2, respectively. The contribution margins per unit are $10 for X, $20 for Y, and $40 for Z.

What is the weighted-average contribution margin per unit for the company?

  1. $21.00
  2. $23.33
  3. $190.00
  4. $19.00 (correct answer)
Explanation: The sales mix of 5:3:2 means there is a total of 5 + 3 + 2 = 10 'parts' in the mix. The sales mix percentages are: X = 5/10 (50%), Y = 3/10 (30%), and Z = 2/10 (20%). The weighted-average contribution margin (WACM) is the sum of the weighted CMs: WACM = (10×0.50)+(10 × 0.50) + (20 × 0.30) + ($40 × 0.20) = $5.00 + $6.00 + $8.00 = 19.00.DistractorB(19.00. Distractor B (23.33) is the simple average of the three CMs ((10+10+20+40)/3).DistractorC(40)/3). Distractor C (190.00) is the contribution margin of a composite unit or 'bundle' containing 5 units of X, 3 of Y, and 2 of Z. Distractor D ($21.00) is the result of swapping the weights of Y and Z in the calculation.

Question 9

A company sells a standard product with a contribution margin of $30 and a premium product with a contribution margin of $70. The company currently sells 4 standard products for every premium product. The company is considering a promotional effort for the premium product that is expected to change the sales mix to 3 standard products for every 2 premium products.

What would be the weighted-average contribution margin per unit if the promotional effort is successful?

  1. $38.00
  2. $46.00 (correct answer)
  3. $50.00
  4. $54.00
Explanation: The question asks for the new WACM after the promotional effort. The new sales mix is 3 standard to 2 premium, for a total of 5 units in the mix. The new mix percentages are 3/5 (60%) for standard and 2/5 (40%) for premium. The new WACM is calculated as: New WACM = (30×0.60)+(30 × 0.60) + (70 × 0.40) = $18 + $28 = 46.00.DistractorA(46.00. Distractor A (38.00) is the original WACM, calculated with the 4:1 mix. Distractor C (50.00)isthesimpleaverageofthetwocontributionmargins.DistractorD(50.00) is the simple average of the two contribution margins. Distractor D (54.00) results from inverting the new mix percentages.

Question 10

Artisan Goods sells two products, Carved Boxes and Painted Frames. The sales mix is 1 Box for every 4 Frames. A Carved Box sells for $90 and has variable costs of $50. The company's overall weighted-average contribution margin per unit is $24.

What is the per-unit contribution margin of a Painted Frame?

  1. $22.50
  2. $40.00
  3. $20.00 (correct answer)
  4. $16.00
Explanation: First, find the known values. CM_Box = $90 - $50 = $40. The sales mix is 1:4, meaning 1/5 (20%) of units are Boxes and 4/5 (80%) are Frames. Let CM_Frame be the unknown. Using the WACM formula: $24 = (CM_Box × Mix_Box) + (CM_Frame × Mix_Frame). Substitute values: 24=(24 = (40 × 0.20) + (CM_Frame × 0.80). Simplify: $24 = $8 + 0.80 × CM_Frame. Solve: $16 = 0.80 × CM_Frame. Therefore, CM_Frame = $16 / 0.80 = 20.00.DistractorA(20.00. Distractor A (22.50) represents a calculation error. Distractor B (40.00)istheCMforBoxes.DistractorD(40.00) is the CM for Boxes. Distractor D (16.00) results from forgetting to divide by the weight (0.8).

Question 11

Global Exports Inc. sells Product Alpha and Product Beta. Last year, the company sold 15,000 units of Alpha and 5,000 units of Beta. The contribution margin per unit was $60 for Alpha and $120 for Beta. This year, the company projects a shift in the sales mix to 12,000 units of Alpha and 8,000 units of Beta, with per-unit contribution margins remaining the same.

What is the projected weighted-average contribution margin per unit for this year?

  1. $81.00
  2. $75.00
  3. $90.00
  4. $84.00 (correct answer)
Explanation: The question asks for this year's projected WACM. The projected sales are 12,000 units of Alpha and 8,000 units of Beta, for a new total of 20,000 units. The new sales mix is 12,000/20,000 = 60% for Alpha and 8,000/20,000 = 40% for Beta. The projected WACM is calculated as: WACM = (60×0.60)+(60 × 0.60) + (120 × 0.40) = $36 + $48 = 84.00.DistractorB(84.00. Distractor B (75.00) is the WACM from last year based on the old mix of 15,000:5,000 (a 75%/25% mix). Distractor C (90.00)isthesimpleaverageofthetwocontributionmargins.DistractorD(90.00) is the simple average of the two contribution margins. Distractor D (81.00) is the result of averaging the old and new WACMs, which is not a meaningful metric.

Question 12

A manager is preparing a multi-product CVP analysis. The company has total fixed costs of $300,000 and sells two products, Gizmo and Widget, in a constant mix of 4 Gizmos for every 1 Widget.

  • Gizmo: Selling Price = $50, Variable Cost = $30
  • Widget: Selling Price = $120, Variable Cost = $80

To compute the company's overall break-even point in total units, what is the value of the weighted-average contribution margin per unit that must be used in the calculation?

  1. $24.00 (correct answer)
  2. $30.00
  3. $120.00
  4. $20.00
Explanation: The break-even point in units for a multi-product firm is calculated as Total Fixed Costs / Weighted-Average Contribution Margin (WACM) per unit. The question asks for the WACM. First, find the CM per unit for each product. CM_Gizmo = $50 - $30 = $20. CM_Widget = $120 - $80 = 40.Thesalesmixis4:1,sothemixpercentagesare4/5(8040. The sales mix is 4:1, so the mix percentages are 4/5 (80%) for Gizmo and 1/5 (20%) for Widget. WACM = (CM_Gizmo × Mix_Gizmo) + (CM_Widget × Mix_Widget) = (20 × 0.80) + ($40 × 0.20) = $16 + $8 = 24.00.Thisisthevalueusedasthedenominatorinthebreak−evencalculation.DistractorB(24.00. This is the value used as the denominator in the break-even calculation. Distractor B (30) is the simple average of the two CMs ((20+20+40)/2). Distractor C ($120) is the contribution margin of a composite unit or 'bundle' (4 Gizmos and 1 Widget), calculated as (4 × $20) + (1 × 40),whichisacommonintermediatecalculationbutnottheWACMperunit.DistractorD(40), which is a common intermediate calculation but not the WACM per unit. Distractor D (20) is the contribution margin of just the Gizmo.

Question 13

For purposes of calculating its break-even point, a multi-product company defines a 'composite unit' as consisting of 3 units of Product A and 2 units of Product B, which reflects their relative sales mix. The contribution margin is $15 per unit for Product A and $25 per unit for Product B.

What is the weighted-average contribution margin per individual unit sold?

  1. $40.00
  2. $20.00
  3. $95.00
  4. $19.00 (correct answer)
Explanation: The composite unit contains 3+2 = 5 individual units. The sales mix is 3/5 (60%) for Product A and 2/5 (40%) for Product B. The weighted-average contribution margin (WACM) per individual unit is calculated as: WACM = (CM_A × Mix_A) + (CM_B × Mix_B) = (15×0.60)+(15 × 0.60) + (25 × 0.40) = $9.00 + $10.00 = 19.00.DistractorB(19.00. Distractor B (20.00) is the simple average of the two contribution margins ((15+15+25)/2). Distractor C ($95.00) is the total contribution margin for the entire composite unit (3 × $15 + 2 × $25 = $45 + 50),whichisacommonerrorasitisanintermediatestepinonemethodofcalculatingthebreak−evenpointbutisnottheWACMperunit.DistractorD(50), which is a common error as it is an intermediate step in one method of calculating the break-even point but is not the WACM per unit. Distractor D (40.00) is the simple sum of the two contribution margins per unit.

Question 14

A company sells products Alpha and Beta. Alpha's contribution margin is CM_A and Beta's is CM_B. The company consistently sells 2 units of Alpha for every 1 unit of Beta. Total fixed costs are denoted by F.

Which of the following expressions correctly represents the company's weighted-average contribution margin per unit?

  1. 2CMA+1CMB2CM_A + 1CM_B
  2. 12CMA+12CMB\frac{1}{2}CM_A + \frac{1}{2}CM_B
  3. 23CMA+13CMB\frac{2}{3}CM_A + \frac{1}{3}CM_B (correct answer)
  4. F(23CMA+13CMB)\frac{F}{ (\frac{2}{3}CM_A + \frac{1}{3}CM_B)}
Explanation: The sales mix is 2 units of Alpha for every 1 unit of Beta, meaning there are 3 total 'parts' in the sales mix. Therefore, Alpha constitutes 2/3 of the units sold, and Beta constitutes 1/3 of the units sold. The weighted-average contribution margin is the sum of each product's contribution margin multiplied by its sales mix percentage. This is correctly represented by (2/3)CM_A + (1/3)CM_B. Distractor B represents an unweighted, simple average based on a 1:1 mix. Distractor C represents the contribution margin of a composite unit or 'bundle' (2 Alphas and 1 Beta), not the per-unit average. Distractor D represents the formula for the break-even point in total units, not the weighted-average contribution margin itself.

Question 15

A company sells two products. Product A has a contribution margin of 10perunit,whileProductBisalossleaderwithacontributionmarginof−10 per unit, while Product B is a loss leader with a contribution margin of -5 per unit (its variable costs exceed its selling price). The company maintains a strict sales mix of 3 units of Product A for every 1 unit of Product B, as customers who buy B almost always buy multiple units of A.

What is the weighted-average contribution margin per unit for this company?

  1. $5.00
  2. $2.50
  3. $7.50
  4. $6.25 (correct answer)
Explanation: The sales mix is 3:1, so the mix percentages are 3/4 (75%) for Product A and 1/4 (25%) for Product B. The weighted-average contribution margin (WACM) is calculated by summing the weighted CMs, being careful with the negative sign for Product B. WACM = (CM_A × Mix_A) + (CM_B × Mix_B) = (10×0.75)+(−10 × 0.75) + (-5 × 0.25) = $7.50 - $1.25 = 6.25.DistractorB(6.25. Distractor B (2.50) is the simple average of the two CMs (($10 - 5)/2).DistractorC(5)/2). Distractor C (7.50) is the contribution from Product A alone, ignoring the negative impact of Product B. Distractor D (5.00)resultsfromincorrectlyaddinginsteadofsubtractingthenegativecontributionofB(5.00) results from incorrectly adding instead of subtracting the negative contribution of B (7.50 + $1.25 = 8.75),orsomeothercalculationerror.Forinstance,(8.75), or some other calculation error. For instance, (10 - $5) / 1 = $5.

Question 16

Garden Co. sells two types of fertilizer, Premium and Standard. For every 5 bags of fertilizer sold, 2 are Premium and 3 are Standard. The selling price for Premium is $50 per bag, and its contribution margin ratio is 60%. The selling price for Standard is $30 per bag, and its variable cost is $18 per bag.

What is the weighted-average contribution margin per bag for Garden Co.?

  1. $19.20 (correct answer)
  2. $21.00
  3. $39.00
  4. $42.00
Explanation: First, calculate the contribution margin (CM) per unit for each product. For Premium, CM = Selling Price × CM Ratio = $50 × 60% = $30. For Standard, CM = Selling Price - Variable Cost = $30 - $18 = 12.Thesalesmixis2:3,meaningthemixpercentagesare2/5(4012. The sales mix is 2:3, meaning the mix percentages are 2/5 (40%) for Premium and 3/5 (60%) for Standard. The weighted-average contribution margin (WACM) is (30 × 0.40) + ($12 × 0.60) = $12.00 + $7.20 = 19.20.DistractorB(19.20. Distractor B (21) is the simple average of the two CMs ((30+30+12)/2). Distractor C (39)incorrectlycalculatestheStandardCMratioas4039) incorrectly calculates the Standard CM ratio as 40% and then applies a simple average. Distractor D (42) is the sum of the two contribution margins (30+30+12), ignoring the weighting.

Question 17

A firm sells Product Q and Product R. Product Q has a contribution margin of $60 per unit. Product R has a contribution margin of $90 per unit. The current sales mix is 2 units of Q for every 3 units of R. A new production process is expected to reduce the variable cost of Product Q by $10 per unit, with no change to its selling price or to Product R's costs, and no change in the sales mix.

What will be the impact of the new production process on the firm's weighted-average contribution margin per unit?

  1. It will increase by $7.00.
  2. It will increase by $10.00.
  3. It will increase by $4.00. (correct answer)
  4. It will increase by $78.00.
Explanation: The change only affects Product Q. The contribution margin of Product Q will increase by the amount of the variable cost reduction, so the new CM_Q = $60 + $10 = $70. The sales mix is 2:3, meaning Product Q represents 2/5 or 40% of the units sold. The increase in the weighted-average contribution margin will be the change in Product Q's CM multiplied by its sales mix percentage: Change in WACM = (Change in CM_Q) × (Mix_Q) = $10 × 0.40 = 4.00.Alternatively,onecouldcalculatetheoldWACMandthenewWACMandfindthedifference.OldWACM=(4.00. Alternatively, one could calculate the old WACM and the new WACM and find the difference. Old WACM = (60 × 0.4) + ($90 × 0.6) = $24 + $54 = 78.NewWACM=(78. New WACM = (70 × 0.4) + ($90 × 0.6) = $28 + $54 = $82. The increase is $82 - $78 = 4.00.DistractorB(4.00. Distractor B (10) ignores the sales mix weighting. Distractor C (7)incorrectlyassumesa50/50mix.DistractorD(7) incorrectly assumes a 50/50 mix. Distractor D (78) is the original WACM, not the change.

Question 18

A company sells three products: Basic, Plus, and Pro. The company is considering discontinuing the Basic product line. Current data is as follows:

  • Basic: CM $10/unit, 4,000 units sold
  • Plus: CM $25/unit, 3,000 units sold
  • Pro: CM $50/unit, 1,000 units sold If the Basic line is discontinued, the sales of Plus and Pro are expected to remain unchanged. Total fixed costs will not be affected.

What will be the new weighted-average contribution margin for the company after the Basic product line is discontinued?

  1. $21.88
  2. $31.25 (correct answer)
  3. $37.50
  4. $28.75
Explanation: First, calculate the original WACM for context (though not required for the answer). Total units = 8,000. Mix = 50% Basic, 37.5% Plus, 12.5% Pro. Original WACM = (10×0.5)+(10×0.5) + (25×0.375) + ($50×0.125) = $5 + $9.375 + $6.25 = 20.625.AfterdiscontinuingBasic,thenewtotalunitssoldwillbe3,000(Plus)+1,000(Pro)=4,000units.Thenewsalesmixisbasedonthisnewtotal:MixPlus=3,000/4,000=7520.625. After discontinuing Basic, the new total units sold will be 3,000 (Plus) + 1,000 (Pro) = 4,000 units. The new sales mix is based on this new total: Mix_Plus = 3,000 / 4,000 = 75%. Mix_Pro = 1,000 / 4,000 = 25%. The new WACM is: New WACM = (25 × 0.75) + ($50 × 0.25) = $18.75 + $12.50 = 31.25.DistractorA(31.25. Distractor A (21.88) is an incorrect calculation. Distractor C (37.50)isthesimpleaverageoftheremainingproducts′CMs.DistractorD(37.50) is the simple average of the remaining products' CMs. Distractor D (28.75) results from using the original total units (8,000) as the denominator for the new sales mix, an error in reasoning.

Question 19

A company produces Product A and Product B. The company's overall weighted-average contribution margin is $54 per unit, based on a sales mix of 3 units of A for every 2 units of B. The selling price of Product B is $150 and its variable cost is $60 per unit.

What is the contribution margin per unit for Product A?

  1. $45
  2. $30 (correct answer)
  3. $90
  4. $36
Explanation: First, determine the known information. The sales mix is 3:2, meaning 3/5 (60%) of sales are Product A and 2/5 (40%) are Product B. The contribution margin for Product B is $150 - $60 = $90. Let CM_A be the unknown contribution margin for Product A. The WACM formula is: WACM = (CM_A × Mix_A) + (CM_B × Mix_B). Substitute the known values: 54=(CMA×0.60)+(54 = (CM_A × 0.60) + (90 × 0.40). This gives $54 = 0.60 × CM_A + $36. Solving for CM_A: $54 - $36 = $18 = 0.60 × CM_A. Therefore, CM_A = $18 / 0.60 = 30.DistractorB(30. Distractor B (45) is what you get if you assume a simple 50/50 average. Distractor C (90)isthecontributionmarginforProductB.DistractorD(90) is the contribution margin for Product B. Distractor D (36) is the weighted contribution of Product B to the total WACM, not the CM of Product A.

Question 20

Component Corp. sells two parts, Part 101 and Part 202. Data for the two products are as follows:

  • Part 101: Selling Price $80, Contribution Margin Ratio 25%
  • Part 202: Selling Price $120, Contribution Margin Ratio 40% The company sells 7,000 units of Part 101 and 3,000 units of Part 202 annually.

The company's weighted-average contribution margin per unit is closest to:

  1. $28.40 (correct answer)
  2. $32.50
  3. 32.5%
  4. $34.00
Explanation: First, calculate the contribution margin (CM) per unit for each part. CM_101 = $80 × 25% = $20. CM_202 = $120 × 40% = 48.Next,determinethesalesmix.Totalunits=7,000+3,000=10,000.Mix101=7,000/10,000=7048. Next, determine the sales mix. Total units = 7,000 + 3,000 = 10,000. Mix_101 = 7,000 / 10,000 = 70%. Mix_202 = 3,000 / 10,000 = 30%. The WACM per unit is (20 × 0.70) + ($48 × 0.30) = $14.00 + $14.40 = 28.40.DistractorB(28.40. Distractor B (32.50) is the simple average of the two CMs. Distractor C (32.5%) is the simple average of the two CM ratios, which is conceptually different from the WACM per unit. Distractor D (34.00)incorrectlyinvertsthesalesmixweights,calculating(34.00) incorrectly inverts the sales mix weights, calculating (20 × 0.30) + ($48 × 0.70).