Question
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
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:
| 1 |
| Mountain Monster | Desert Dragon |
| 2 | Sales price | $5,300.00 | $5,300.00 |
| 3 | Variable cost of goods sold | 3,210.00 | 3,350.00 |
| 4 | Manufacturing margin | $2,090.00 | $1,950.00 |
| 5 | Variable selling expenses | 1,030.00 | 1,102.00 |
| 6 | Contribution margin | $1,060.00 | $848.00 |
| 7 | Fixed expenses | 470.00 | 305.00 |
| 8 | Income from operations | $590.00 | $543.00 |
In addition, the following sales unit volume information for the period is as follows:
| Mountain Monster | Desert Dragon | |
| Sales unit volume | 4,800 | 4,650 |
Required:
| a. | Prepare 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 for text entries. |
| b. | What advice would you give to the management of PowerTrain Sports Inc. regarding the relative profitability of the two products? |
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Financial and Managerial Accounting
Authors: Carl S. Warren, James M. Reeve, Jonathan Duchac
13th edition
1285866304, 978-1285866307
