Colossal Beverages Company sells two products, A and B. Mist predicts that it will sell 2,500 units of A and 2,000 units of B during the next period. The unit contribution margins are $4.00 and $4.80 for products A and B, respectively. What is the weighted-average unit contribution margin? (Round your answer to the nearest cent.)

The correct answer is $4.36.

Explanation:

According to the scenario, the given data are as follows:

Product A = 2,500 units

Products B = 2,000 units

Contribution margin of A = $4

Contribution margin of B = $4.80

So, we can calculate the weighted-average unit contribution margin by using following formula:

Weighted-average unit contribution = (Total contribution Of product A + Total contribution of product B) ÷ Total number of units sold

Where, Total contribution Of product A = 2,500 units × $4 = $10,000

And Total contribution of product B = 2,000 units × $4.8 = $9,600

By putting the value, we get

Weighted-average unit contribution = ($10,000 + $9,600) ÷ 2,500 + 2,000

= $19,600 ÷ 4,500

= $4.36

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