UESTION 3 An establishment has three departments with variab

UESTION 3 An establishment has three departments with variable costs as a percenta e of sales revenue of 30% 40% & 50% espect ely Ea level of sales revenue. The weighted average contribution margin is depart thasthes am 40% 60% e) 67% 3396

Solution

Contribution Margin = 1- Variable Cost

Department 1=1- 30%

= 0.70

Department 2=1- 40%

= 0.60

Department 3=1- 50%

= 0.50

Weights = 1 /3

= 0.3333

Weighted Average Contribution Margin = 0.3333 * 0.70 + (0.33333* 0.60) +(0.3333*0.50)

= 0.594

= 0.60

=60%

Hence, the correct answer is 60%