Answer:
will decrease per unit
If the sales mix shifts to four units of Product A and one unit of Product B, then the weighted-average contribution margin will: $ 4.8 per unit of sales mix.
Explanation:
Jeffries Corporation:
Product A: Product B:
Revenue $16.00 $24.00
Variable Cost $12.00 $16.00
Contribution Margin $ 4.0 $8.0
Sales Mix 3 units 1 unit
% 0.75 0.25
When he sales mix consists of three units of Product A and one unit of Product B the weighted-average contribution margin was
C.M (3* Product A ) +C. M( 1* Product B)
$ 4.0*0.75 + $8.0*0.25= $ 3.0 + $2.0 = $ 5.0
If the sales mix shifts to four units of Product A and one unit of Product B, then the weighted-average contribution margin will: $ 4.8 per unit of sales mix.
The new Sales mix % will be
Product A = 4/5= 0.8 % and
Product B = 1/5 = 0.2%
C.M (4* Product A ) +C. M( 1* Product B)
$ 4.0*0.8 + $8.0* 0.2= $ 3.2 + $1.6 = $ 4.8
Because the contribution margin of Product B is greater and the CM of Product A is less so when we decrease the % of Product B in the Sales mix the CM is also decreased.
