ACCA PM · Chapter 5 · Question 1 of 10
Kappa Co sells two products in the constant unit ratio of 3 units of A to 2 units of B. Product A sells for $20 with variable cost of $12 per unit. Product B sells for $30 with variable cost of $15 per unit. Fixed costs are $186,000 per period. What is the weighted average contribution to sales ratio?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) 45%
Explanation
For a batch of 3 A and 2 B: contribution = (3 x $8) + (2 x $15) = $54; revenue = (3 x $20) + (2 x $30) = $120. Weighted average C/S ratio = $54 / $120 = 45%. Weighting the individual C/S ratios (40% and 50%) by units sold, rather than by revenue, gives the wrong answer of 44%.
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