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8 September, 02:45

Steamroller Company sells two products-J and B. Steamroller predicts that it will sell 7400 units of J and 6500 units of B in the next period. The unit contribution margins are $2.90 and $6.30 for products J and B, respectively. What is the weighted-average unit contribution margin?

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  1. 8 September, 03:05
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    The weighted-average unit contribution margin is $4.50 per unit.

    Explanation:

    Weighted Average contribution margin is the average contribution margin of all products company sells.

    Sale

    Product J = 7,400

    Product B = 6,500

    Unit contribution margin

    Product J = $2.9

    Product B = $6.3

    Contribution of Product J = 7,400 x $2.9 = $21,460

    Contribution of Product B = 6,500 x $6.3 = $40,950

    Total Contribution = $21,460 + 40,950 = $62,410

    Total Sales Unit = 7,400 + 6,500 = 13,900 units

    Weighted average contribution margin = Total Contribution / Total sales unit

    Weighted average contribution margin = $62,410 / 13,900 units

    Weighted average contribution margin = $4.49 per unit

    Weighted average contribution margin = $4.5 per unit
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