Practicing Success

Target Exam

CUET

Subject

Entrepreneurship

Chapter

Business Arithmetic

Question:

Following information is related to sales mix of Product A , B and C.

Product A (Rs) (Rs) (Rs)
Sales Price Per Unit 15 21 36
Variable Cost Per Unit 9 14 19
Sales Mix Percentage 20% 20% 60%

Total Fixed Cost= Rs 40,000

What is the weighted average "contribution margin" per unit for the sales mix?

Options:

Rs 1.2

Rs 1.4

Rs 10.2

Rs 12.8

Correct Answer:

Rs 12.8

Explanation:

Weighted average contribution margin per unit for the sales mix= Product A Contribution Mix(CM) per Unit*Product A Sales Mix Percentage (SMP)+ Product B CM per unit* Product B SMP+ Product C CM per unit* Product C SMP

Product A (Rs) (Rs) (Rs)
Sales Price Per Unit 15 21 36
Variable Cost Per Unit 9 14 19
Contribution Margin Per Unit 6 7 17
Sales Mix Percentage 20% 20% 60%
  1.2 1.4 10.2

Weighted Average CM per Unit= 1.2+1.4+10.2=12.80