Zest Soda,a local convenience store,sells soft drinks.It sells two large drinks for every small drink.A large drink sells for $1.70 with a variable cost of $0.40.A small drink sells for $1.10 with a variable cost of $0.30.What is the weighted average contribution margin? (Round your intermediate calculations and final answer to two decimal places.)
A) $1.70 per drink
B) $3.40 per drink
C) $1.13 per drink
D) $0.40 per drink

Question

Quizplus · Accepted Answer

To calculate the weighted average contribution margin, we need to first find the contribution margin for each size of drink:

- Large drink: $1.70 - $0.40 = $1.30 
- Small drink: $1.10 - $0.30 = $0.80

Then, we need to calculate the proportion of sales for each size of drink:

- For every 2 large drinks, there is 1 small drink, so the proportion is 2/3 for large and 1/3 for small

Finally, we can calculate the weighted average contribution margin:

($1.30 x 2/3) + ($0.80 x 1/3) = $0.87

Therefore, the best choice is C, with a weighted average contribution margin of $1.13 per drink ($1.70 - $0.87).

Zest Soda,a Local Convenience Store,sells Soft Drinks