Question

Barclay enterprises manufactures and sells three distinct styles of bicycles: the youth model sells for $340 and has a unit contribution margin of $115; the adult model sells for $870 and has a unit contribution margin of $460; and the recreational model sells for $1,060 and has a unit contribution margin of $510. the company's sales mix includes: 5 youth models; 9 adult models; and 6 recreational models. if the firm's annual fixed costs total $6,520,000, calculate the firm's contribution margin ratio per composite unit (rounded to the nearest whole percentage).

Answer 1

Answer: 48.9%

Explanation:

Model - - - - - - Selling price - - - - cont/margin

Youth - - - - - - $340 - - - - - - - - - - - $115

Adult - - - - - - - $870 - - - - - - - - - - - $460

Recreational - - $1060 - - - - - - - - - $510

Contribution margin per composite unit

Youth = $115 × 5 = $575

Adult = $460 × 9 = $4140

Recreational = $510 × 6 = $3060

TOTAL = $7775

Selling price per composite unit:

Youth = $340 × 5 = $1700

Adult = $870 × 9 = $7830

Recreational = $1060 × 6 = $6360

TOTAL = $15890

Contribution margin ratio per composite unit ;

($7,775 ÷ $15,890) × 100

0.4893 × 100 = 48.9%