Head Pops Inc. manufactures two models of solar-powered, noise-canceling headphones: Sun Sound and Ear Bling models. The company is operating at less than full capacity. Market research indicates that 31,700 additional Sun Sound and 34,900 additional Ear Bling headphones could be sold. The income from operations by unit of product is as follows:

	Sun Sound Headphones		Ear Bling Headphones
Sales price	$34.50		$53.80
Variable cost of goods sold	19.30		30.10
Manufacturing margin	$15.20		$23.70
Variable selling and administrative expenses	6.90		10.80
Contribution margin	$8.30		$12.90
Fixed manufacturing costs	3.10		4.80
Income from operations	$5.20		$8.10

Prepare an analysis indicating the increase or decrease in total profitability if 31,700 additional Sun Sound and 34,900 additional Ear Bling headphones are produced and sold, assuming that there is sufficient capacity for the additional production. Round your per unit answers to two decimal place.

Head Pops Inc.

Analysis

Sun Sound Headphones

Ear Bling Headphones

Unit volume increase

x Contribution margin per unit

$

$

Increase in profitability

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

	Mountain Monster		Desert Dragon
Sales price	$4,200		$2,800
Variable cost of goods sold	2,650		1,880
Manufacturing margin	$1,550		$920
Variable selling expenses	626		276
Contribution margin	$924		$644
Fixed expenses	430		260
Income from operations	$494		$384

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

	Mountain Monster		Desert Dragon
Sales unit volume	2,500		1,800

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

PowerTrain Sports Inc.
Contribution Margin by Product
	Mountain Monster	Desert Dragon
	$	$
	$	$
	$	$
	%	%

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

The line provides the largest total contribution margin and the largest contribution margin ratio. If the sales mix were shifted more toward the line, the overall profitability of the company would increase.