McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2.

Product A sells for $87; Z sells for $108.

Variable costs for product A are $46; for Z $53.

Fixed costs are $430,500.

Compute the contribution margin per composite unit.

a) $205.

b) $305.

c) $287.

d) $315.

e) $336.

Option (d) is correct.

Explanation:

Contribution margin per unit for Product A:

= Selling price - variable cost

= $87 - $46

= $41

Contribution margin per unit for Product Z:

= Selling price - variable cost

= $108 - $53

= $55

contribution margin per composite unit:

= (Contribution margin per unit for Product A * 5) + (Contribution margin per unit for Product Z * 2)

= ($41 * 5) + ($55 * 2)

= $205 + $110

= $315