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   Question Content Area

   Product Profitability Analysis

   Galaxy Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Conquistador and Hurricane, from a single manufacturing facility. The manufacturing facility operates at 100% of capacity. The following per-unit information is available for the two products:

   	Conquistador		Hurricane
   Sales price	$6,400		$4,200
   Variable cost of goods sold	(4,030)		(2,810)
   Manufacturing margin	$2,370		$1,390
   Variable selling expenses	(1,090)		(802)
   Contribution margin	$1,280		$588
   Fixed expenses	(600)		(240)
   Operating income	$680		$348

   In addition, the following sales unit volume information for the period is as follows:

   	Conquistador		Hurricane
   Sales unit volume	2,100		1,500

   Question Content Area

   a. Prepare a contribution margin by product report. Compute the contribution margin ratio for each product as a whole percent.

   Galaxy Sports Inc. Contribution Margin by Product

   	Conquistador	Hurricane
   Contribution marginCost of goods soldDirect laborGross profitSales	$- Select -	$- Select -
   Fixed cost of goods soldFixed selling expensesManufacturing marginSalesVariable cost of goods sold	- Select -	- Select -
   Contribution marginCost of goods soldFixed manufacturing costsGross profitManufacturing margin	$- Select -	$- Select -
   Fixed cost of goods soldFixed selling expensesManufacturing marginSalesVariable selling expenses	- Select -	- Select -
   Contribution marginCost of goods manufacturedFixed manufacturing costsFixed salesManufacturing margin	$- Select -	$- Select -
   Contribution margin ratioFixed manufacturing costsFixed salesManufacturing marginVariable cost of goods sold	- Select -%	- Select -%

   Question Content Area

   b. What advice would you give to the management of Galaxy Sports Inc. regarding the profitability of the two products?

   The

   ConquistadorHurricane

   line provides the largest total contribution margin and the largest contribution margin ratio. If the sales mix were shifted more toward the

   ConquistadorHurricane

   line, the overall profitability of the company would increase.