Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for a recent month for the two games appears below: Claim Jumper Makeover Total Sales $ 104,000 $ 52,000 $ 156,000 Variable expenses 32,200 6,800 39,000 Contribution margin $ 71,800 $ 45,200 117,000 Fixed expenses 86,850 Net operating income $ 30,150 Required: 1. What is the overall contribution margin (CM) ratio for the company

Weighted average contribution margin ratio = 0.726

Explanation:

Giving the following information:

Sales:

Claim Jumper = $104,000

Makeover = $52,000

Variable cost:

Clain Jumper = $32,200

Makeover = $6,800

First, we need to calculate the participation of the sales for each product:

Claim Jumper = 104,000/156,000 = 0.67

Makeover = 52,000/156,000 = 0.33

To calculate the weighted average contribution margin ratio, we need to use the following formula:

Weighted average contribution margin ratio = (weighted average sales - weighted average variable cost) / weighted average sales

weighted average sales = (0.67*104,000) + (0.33*52,000)

weighted average sales = 86,840

weighted average unitary variable cost = (0.67*32,200) + (0.33*6,800)

weighted average unitary variable cost = 23,818

Weighted average contribution margin ratio = (86,840 - 23,818) / 86,840

Weighted average contribution margin ratio = 0.726