Question

McCoy Brothers manufactures and sells two products, A and Z in the ratio of 5:2. Product A sells for $86; Z sells for $124. Variable costs for product A are $45; for Z $49. Fixed costs are $429,500. Compute the contribution margin per composite unit.

Answer 1

the contribution margin per composite unit is $365

Explanation:

The computation of the contribution margin per composite unit is shown below:

= Contribution margin per unit for product A × ratio of A + Contribution margin per unit for product B × ratio of B

= ($86 - $45) × 5 + ($124 - $49) × 2

= $205 + $160

= $365

Hence the contribution margin per composite unit is $365