Question

Zest Soda, a local convenience store, sells soft drinks. It sells two large drinks for every small drink. A large drink sells for $1.70 with a variable cost of $0.40. A small drink sells for $1.10 with a variable cost of $0.30. What is the weighted average contribution margin?

Answer 1

Answer: Weighted average contribution margin would be 1.13.

Step-by-step explanation:

Since we have given that

Cost of large drink = $1.70

Variable cost of large drink = $0.40

Cost of small drink = $ 1.10

Variable cost of small drink = $0.30

According to question, we get that It sells two large drinks for every small drink.

Ratio would be 2:1.

Cost of large drink becomes = $1.70-0.40 = $1.30

Cost of small drink becomes = $1.10 - $ 0.30 = $0.80

So, Weighted average contribution margin would be

$1.30\times \dfrac{2}{3}+0.80\times \dfrac{1}{3}\\\\=1.13$

Hence, weighted average contribution margin would be 1.13.