Weighted Average Contribution Margin

Weighted Average Contribution Margin

The average amount that each unit of product contributes to a company over the cost of producing it, after accounting for the different price of different products. For example, suppose half a company's sales come from Product A and half come from Product B. If the sale of each unit of Product A results in a $5 profit, and the sale of each unit of Product B results in $15, the weighted average contribution margin is $10.
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This assumption allows us to use a weighted average contribution margin to analyze the effect of various situations on our profits.
Using the weighted average contribution margin lets us get a feel for what caused the Contribution Margin Volume Variance because breaking the total variance into two smaller variances gives us a better picture of what happened during the period.
When we calculated the Sales Volume Variance, we multiplied both unit variances by the weighted average contribution margin.
If we multiply that number by the weighted average contribution margin, we get Bob's Market Size Variance, our estimate of how much the change in the overall market size should have changed Bob's net income.
Market share = Actual market size x (Actual market share - Budgeted market share) x Budgeted weighted average contribution margin per unit
Market size = (Actual market size-Budgeted market size) x Budgeted market share x Budgeted weighted average contribution margin per unit
Some students calculate the respective weighted average contribution margins of $39.
The denominator for the multiproduct model represents a weighted average contribution margin, i.
The weighted average contribution margin is determined by multiplying the product's contribution margin by its sales mix.
60 Total weighted average contribution margin $100.
The sum of these two products (without rounding) gives Bob's a weighted average contribution margin of $55.
Of course, we actually linked in the fixedcost amount and weighted average contribution margin cell references rather than using words.
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