NS Electronics manufactures and sells two popular gaming consoles: Model A and Model B. The company has provided the following information for the upcoming year:
Model A:

Selling price per unit: $400
Variable cost per unit: $240
Expected sales volume: 20,000 units

Model B:

Selling price per unit: $500
Variable cost per unit: $320
Expected sales volume: 15,000 units

Total fixed costs for the company: $2,400,000
Based on this information, calculate the following the weighted average contribution margin per unit. Note: Round to two decimal places, provide your answer without the unit sign, i.e., X,XXX.XX, and show your workings.
Answer: [Fill in the blank]

Workings: [Fill in the blank]

Question

NS Electronics manufactures and sells two popular gaming consoles: Model A and Model B. The company has provided the following information for the upcoming year:
Model A:

Selling price per unit: $400
Variable cost per unit: $240
Expected sales volume: 20,000 units

Model B:

Selling price per unit: $500
Variable cost per unit: $320
Expected sales volume: 15,000 units

Total fixed costs for the company:          $2,400,000
Based on this information, calculate the following the weighted average contribution margin per unit. Note: Round to two decimal places, provide your answer without the unit sign, i.e., X,XXX.XX, and show your workings.
Answer: [Fill in the blank]

Workings: [Fill in the blank]

BlackTom AI · Accepted Answer

The task asks for the weighted average contribution margin per unit based on the given product mix and contribution margins.
First, determine the contribution margin per unit for each model:
- Model A: Selling price 400 minus variable cost 240 equals CM_A = 160 per unit.
- Model B: Selling price 500 minus variable cost 320 equals CM_B = 180 per unit.
Next, establish the sales mix weights using the expected volumes:
- Model A volume: 20,000 units
- Model B volume: 15,000 units
- Total expected units: 20,000 + 15,000 = 35,000 units
Then compute the weighted average CM per unit by weighting each model’s CM by its share of total units:
WACM = [(CM_A × Q_A) + (CM_B × Q_B)] / (Q_A + Q_B)
Plug in the numbers:
WACM = [(160 × 20,000) + (180 × 15,000)] / 35,000
= (3,200,000 + 2,700,000) / 35,000
= 5,900,000 / 35,000
= 168.571428...
Round to two decimals as required: 168.57.
Notes:
- This calculation uses volumes to weight the contribution margins because the mix determines how often each model contributes to overall margin.
- Fixed costs are not used when computing CM per unit; they affect profitability but not the per-unit contribution margin itself.
- If one instead weighted by revenue or by different interpretive schemes, the result would differ, underscoring why choosing the correct weighting (here, units) is critical.

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