Question
Please advise on this problem: PowerTrain Sports Inc. manufactures and sells two styles of ATV's, the Mountain Monster and the Desert Dragon, from a single
Please advise on this problem:
PowerTrain Sports Inc. manufactures and sells two styles of ATV's, the Mountain Monster and the 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 MonsterDesert Dragon
Sales Price$5,000.00$5,275.00
Variable cost of goods sold$3,275.00$3,500.00
Manufacturing margin$1,725.00$1,775.00
Variable selling expenses$225.00$825.00
Contribution margin$1,500.00$950.00
Fixed expenses$ 485.00$310.00
Income from operations$1,015.00$640.00
In addition, the following sales unit volume information for the period is as follows:
Mountain MonsterDesert Dragon
Sales unit volume4,9004,750
a.Make a contribution margin by product report.Calculate the contribution margin ratio for each.Refer to the amount descriptions list provided for the exact wording of the answer choices.
b.What advice would you give to the management of PowerTrain Sports Inc. regarding the relative profitability of the two products?
The Mountain monster line provides the smaller/larger/ or same total contribution margin and the same/smaller/or larger contribution margin ratio.If the sales mix were shifted more toward the Desert Dragon/Mountain Monster line, the overall profitability of the company would increase.
Amount descriptions:
Contribution margin
Contribution margin ratio
Cost of goods sold
Fixed expenses
Gross profit
Manufacturing margin
Revenues
Variable cost of goods sold
Variable selling expenses
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started