If Buttercup, Inc. sells two products with a sales mix of 75% : 25%, and the respective contribution margins are $80 and $240, then weighted-average unit contribution margin is $120.

Question

Quizplus · Accepted Answer

Weighted-average unit contribution margin can be calculated using the formula:

Weighted-average unit contribution margin = (Contribution margin of Product A x Sales mix of Product A) + (Contribution margin of Product B x Sales mix of Product B)

Plugging in the numbers given in the question:

Weighted-average unit contribution margin = ($80 x 0.75) + ($240 x 0.25)
                                      = $60 + $60
                                      = $120

Therefore, the statement is true.