Answer the following questions using the information below: The following inform

Question

Answer the following questions using the information below: The following information is for the Jeffries Corporation Product A: Revenue $16.00 $12.00 Variable Cost $24.00 $16.00 Product B: Revenue Variable Cost Total fixed costs $75,000 Assume the sales mix consists of three units of Product A and one unit of Product B. If the sales mix shifts to four units of Product A and one unit of Product B, then the weighted-average contribution margin will 0 A. decrease per unit B. increase per unit O C. stay the same O D. either increase or stay the same

Explanation / Answer

Contribution margin = Revenue - Variable cost

Contribution margin for Product A = $16 - $12 = $4

Contribution margin for Product B = $24 - $16 = $8

Weighted average contriibution margin = (contribution margin of Product A * Sales mix) + (contribution margin of Product B * Sales mix)

= ($4*3/4) + ($8*1/4)

= $5

Weighted average contribution margin after the change in salex mix = ($4*4/5) + ($8*1/5)

= $4.8

The answer is A.

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