ou are the Chief Financial Officer of Max Gifts Company. A small company that sells Italian Memorabilia which are (1) snow globes with boats and (2) snow globes with buildings inside. The company's August 2021 sales and expenses are provided below: Boats Globe Building Globe Sales $20,000 $80,000 Variable Cost $15,000 $40,000 No. Momorabilia sold 200 1000 Sales Mix 20% 80% Monthly Fixed costs are $37,000. Required: e. Compute the weighted average contribution ratio.
You are the Chief Financial Officer of Max Gifts Company. A small company that sells Italian Memorabilia which are (1) snow globes with boats and (2) snow globes with buildings inside. The company's August 2021 sales and expenses are provided below:
Boats Globe Building Globe
Sales $20,000 $80,000
Variable Cost $15,000 $40,000
No. Momorabilia sold 200 1000
Sales Mix 20% 80%
Monthly Fixed costs are $37,000.
Required:
e. Compute the weighted average contribution ratio.
Calculation of Weighted Average Contribution margin ratio
Weighted Average Contribution margin ratio = (Contribution margin ratio of Boats Globe X Sales Mix of Boats Globe) + (Contribution margin ratio of Building Globe X Sales Mix of Building Globe)
= (25% X 20%) + (50% + 80%)
= 5% + 40%
= 45%
Therefore, contribution margin ratio is 45%.
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