Question

Sally's Fries sells four large fries for every three small ones. A small fry sells for...

Sally's Fries sells four large fries for every three small ones. A small fry sells for $2 with a variable cost of $0.75. A large fry sells for $6 with a variable cost of $1.50 What is the weighted average contribution margin?

$9.67

$5.46

$3.78

$3.11

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Answer #1

The correct answer is $ 3.11

Contribution Margin for small fry = Selling Price - Variable Cost

= $ 2 - $ 0.75

= $ 1.25

Contribution Margin for large fry = Selling Price - Variable Cost

= $ 6 - $ 1.50

= $ 4.50

Small Fry Large Fry Total
Contribution Margin per unti 1.25 4.5
Sales Mix 3 4 7.00
Contribution Margin ( Contribution Margin per unit* sales mix) 3.75 18 21.75
Weighted average contribution margin (Contribution Margin Total / Sales Mix total) 3.11

Weighted average contribution margin = $ 3.11

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