Question

Calculate weighted average contribution margin from following and breakeven product
Product
Sales Price
Variable cost
Sales mix %
Fixed cost 80,000
X Y Z 30 40 70 18 26 36
20% 20% 60%

Answer 1

Answer:

Before examining contribution margins, let’s review some key concepts: fixed costs, relevant range, variable costs, and contribution margin. Fixed costs are those costs that will not change within a given range of production. For example, in the current case, the fixed costs will be the student sales fee of $100. No matter how many shirts the club produces within the relevant range, the fee will be locked in at $100. The relevant range is the anticipated production activity level. Fixed costs remain constant within a relevant range. If production levels exceed expectations, then additional fixed costs will be required.