Question

Clipper Company sells two types of nail clippers. One focuses on the economy oriented customer and the other aims to satisfy the high-end clientele. The economy clipper cost $3 and has a sales price of $5. The high-end model costs $9 and sales for $12. Fixed costs associated with this product line amount to $35,880. Economy clippers constitute 70 percent of the market with the remaining 30 percent being high-end clippers. Based on this information what is the weighted average contribution margin

Answer 1

Answer:

 2.30

Explanation:

The computation of the weighted average contribution margin is shown below:

Particulars     Nail Clipper 1        Nail Clipper 2        Total

Selling Price          $5                           $12  

Less: Variable Cost $3                          $9  

Contribution Margin $2                         $3  

PV Ratio                  40%                        25%  

                    ($2 ÷ $5)                  ($3 ÷ $12)

Weights                 0.7                             0.3  

Weighted Average    28.00%               7.50%            35.50%

Weighted average

contribution margin  1.40                         0.90    2.30