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What is the weighted average contribution margin

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Question - Petersville Videos is a boutique video shop located in Caulfield, a suburb of Melbourne, Australia. The owner of Petersville Videos, Peter Villiers, is examining his pricing structure for the two types of videos he stocks - classic videos and modern DVD's, due to recent complaints on prices by customers.

The two types of videos Petersville Videos sells are Classic 1950's style movies that are considered premium and the more recent DVD's produced by the main movie houses. The corporate tax rate is 25%.

Table 1 - Pricing and Variable Cost information for Petersville Videos

Classic Videos

Modern DVD's

Total

Price per video/DVD ($)

40

30

Variable Cost per DVD/video ($)

20

20

Number of items sold

1,000

4,000

5,000

Fixed Costs ($)

24,000

Required -

(a) What is the Weighted Average Contribution margin based on the current number of Videos and DVDs sold? Show all the workings.

(b) Based on the current Classic Videos/Modern DVD's sales, what is the After Tax Profit earned for the period? Show all the workings.

(c) If the sales ratio of Classic Videos/Modern DVD's changed from the current ratio to 1:10, what would the total revenue at the breakeven point be? Show all the workings.

Reference no: EM133189750

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