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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.

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 $5,800 $3,800
Variable cost of goods sold (3,650) (2,550)
Manufacturing margin $2,150 $1,250
Variable selling expenses (816) (680)
Contribution margin $1,334 $570
Fixed expenses (630) (230)
Operating income $704 $340

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

Conquistador Hurricane
Sales unit volume 3,200 2,300

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 profitSalesSales

$Sales $Sales

Fixed cost of goods soldFixed selling expensesManufacturing marginSalesVariable cost of goods soldVariable cost of goods sold

Variable cost of goods sold Variable cost of goods sold

Contribution marginCost of goods soldFixed manufacturing costsGross profitManufacturing marginManufacturing margin

$Manufacturing margin $Manufacturing margin

Fixed cost of goods soldFixed selling expensesManufacturing marginSalesVariable selling expensesVariable selling expenses

Variable selling expenses Variable selling expenses

Contribution marginCost of goods manufacturedFixed manufacturing costsFixed salesManufacturing marginContribution margin

$Contribution margin $Contribution margin

Contribution margin ratioFixed manufacturing costsFixed salesManufacturing marginVariable cost of goods soldContribution margin ratio

Contribution margin ratio% Contribution margin ratio%

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