Geneva Bottled Water Co.: Weighted Average Contribution Margin Analysis

What is the weighted average contribution margin per unit on the 36-oz. and 20-oz. bottled water products?

a. $ 2.11
b. $ 1.76
c. $ 4.22
d. $ 0.70

Weighted Average Contribution Margin Calculation

The weighted average contribution margin per unit on the 36-oz. and 20-oz. bottled water products can be calculated by multiplying the contribution margin per unit of each product by its respective sales ratio, and then summing these values together.

Geneva Bottled Water Co. is analyzing the difference between sales of the 36-oz. and 20-oz. bottled water products to determine the weighted average contribution margin per unit.

Calculation Steps:

1. Calculate the total contribution margin for each product:

- For the 36-oz. bottle: $2.02 * 1 (sales ratio) = $2.02

- For the 20-oz. bottle: $0.44 * 5 (sales ratio) = $2.20

2. Add the total contribution margins for each product together:

$2.02 + $2.20 = $4.22

To calculate the weighted average contribution margin per unit, we multiply the contribution margin per unit of each product by its sales ratio and then sum them together. In this case, the contribution margin per unit for the 36-oz. bottle is $2.02 and the sales ratio is 1. The contribution margin per unit for the 20-oz. bottle is $0.44 and the sales ratio is 5. By multiplying these values and summing them together, we get a weighted average contribution margin per unit of $4.22.

Therefore, the weighted average contribution margin per unit on the 36-oz. and 20-oz. bottled water products is $4.22.

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