Sorento Company has two divisions: Sporting Goods and Sports Gear. The sales mix is 45.00% for Sporting Goods and 55.00% for Sports Gear. The company incurs $12,500 in fixed costs. The contribution margin ratio for Sporting Goods is 70.00%, while for Sports Gear it is 10.00%. What is the company's weighted-average contribution margin ratio?

Weighted average contribution margin ratio = 0.37 or 37%

Explanation:

The contribution margin tells us how much a product's selling price is contributing towards covering the fixed costs after deducting the variable cost related to the product. Thus, the contribution margin is calculated as the difference between the selling price and the variable cost.

The contribution margin ratio is the contribution margin expressed as a percentage of the selling price.

To calculate the composite or overall break even point for a business having more than one product, we use the weighted average contribution margin ratio.

It is calculated as follows,

Weighted average contribution margin ratio = Weight of Product A in sales mix * contribution margin ratio of product A + Weight of Product B in sales mix * contribution margin ratio of product B + ... + Weight of Product N in sales mix * contribution margin ratio of product N

Weighted average contribution margin ratio = 0.45 * 0.7 + 0.55 * 0.1

Weighted average contribution margin ratio = 0.37 or 37%

i would say iii (3) because in order to compare a price you have to use as a reference other near stores because it's its

hope i explained myself