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Target Exam

CUET

Subject

Entrepreneurship

Chapter

Business Arithmetic

Question:

Toy craft produces toy alligators and toy dolphins. Fixed costs are  Rs 1,290,000 per year. Sales revenue and variable costs per unit are as follow:

Particulars Alligators (in Rs) Dolphins (in Rs)
Sales price 20 25
Variable Price 8 10

Suppose the company currently sells 60,000 alligators per year and 140,000 dolphins per year (Sales mix percentage 6:14). Assuming the sales mix stays constant, answer the following question.

What will be the weighted average contribution margin in rupees?

Options:

12.10

14.10

15.20

16.25

Correct Answer:

14.10

Explanation:

 

Particulars Alligators (in Rs) Dolphins (in Rs) Total 
Total Units 60,000 1,40,000 2,00,000
Sales price (Rs)  20 25  
Variable Price 8 10  
Sales  12,00,000 35,00,000 47,00,000
Variable Cost 4,80,000 14,00,000 18,80,000
Contribution Margin in Rs (Sales-Variable Cost) 7,20,000 21,00,000 28,20,000
Less Fixed Cost     12,90,000
Net Income     15,30,000

 Weighted Average Contribution Margin= Total Contribution/ Total Units

28,20,000/2,00,000=Rs 14.10

 

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