The efficiency formula for weighted contribution is which expression?

The efficiency formula for weighted contribution is which expression?

• A. Cm * percent of sales
• B. Cm / percent of sales
• C. Percent of sales
• D. Cm plus percent of sales

Answer: (A)

Weighting the contribution margin by how much of the total sales a product represents captures how much profit a product actually adds to the mix, considering both its margin and its sales share. The correct expression multiplies the contribution margin per unit (Cm) by the percent of sales, giving the weighted contribution for that product. For example, if Cm is 20 and the product accounts for 0.25 of total sales, its weighted contribution is 20 × 0.25 = 5. In a full portfolio, you sum these products across all items to get the overall weighted contribution. Dividing Cm by the percent of sales would distort the contribution value, and using just the percent of sales ignores the margin size. Adding Cm and percent of sales combines quantities that aren’t meaningfully comparable.

Weighting the contribution margin by how much of the total sales a product represents captures how much profit a product actually adds to the mix, considering both its margin and its sales share. The correct expression multiplies the contribution margin per unit (Cm) by the percent of sales, giving the weighted contribution for that product. For example, if Cm is 20 and the product accounts for 0.25 of total sales, its weighted contribution is 20 × 0.25 = 5. In a full portfolio, you sum these products across all items to get the overall weighted contribution.

Dividing Cm by the percent of sales would distort the contribution value, and using just the percent of sales ignores the margin size. Adding Cm and percent of sales combines quantities that aren’t meaningfully comparable.