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:

Line Item Description	Conquistador	Hurricane
Sales price	$6,000	$3,800
Variable cost of goods sold	(3,780)	(2,550)
Manufacturing margin	$2,220	$1,250
Variable selling expenses	(960)	(604)
Contribution margin	$1,260	$646
Fixed expenses	(590)	(260)
Operating income	$670	$386

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

Line Item Description	Conquistador	Hurricane
Sales unit volume	2,000	1,400

Question Content Area

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

Line Item Description	Conquistador	Hurricane
	$- Select -	$- Select -
	- Select -	- Select -
	$- Select -	$- Select -
	- Select -	- Select -
	$- Select -	$- Select -
	- 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 fill in the blank 1 of 2

ConquistadorHurricane

line provides the largest total contribution margin and the largest contribution margin ratio. If the sales mix were shifted more toward the fill in the blank 2 of 2

ConquistadorHurricane

line, the overall profitability of the company would increase.