Question

A product sells for $10 and has unit variable costs of $7. This product accounts for $25,000 in annual sales, out of the firm's total of $80,000. When performing multiproduct break-even analysis, what is the weighted contribution of this product?

Answer 1

Answer: Weighted contribution 0.09375

Step-by-step explanation:

Product sells for $10

Unit variable cost $7

Product account annual sales $25000

Firm total $8000

Contribution margin = sales price - variable cost

Contribution margin = 10 - 7 = 3

Product annual sales = 25000 / 10 = 2500

Weighted contribution = contribution margin * product units sold / total firm sales sold

(3 * 2500) / 80000 = 0.09375