Question
Product profitability analysis Instructions Amount Descriptions Contribution Margin Report Final Question X Instructions PowerTrain Sports Inc. manufactures and sells two styles of All Terrain Vehicles
Product profitability analysis
Instructions
Amount Descriptions
Contribution Margin Report
Final Question
X
Instructions
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 | $5,400.00 | $5,300.00 |
| 3 | Variable cost of goods sold | 3,255.00 | 3,400.00 |
| 4 | Manufacturing margin | $2,145.00 | $1,900.00 |
| 5 | Variable selling expenses | 1,065.00 | 946.00 |
| 6 | Contribution margin | $1,080.00 | $954.00 |
| 7 | Fixed expenses | 485.00 | 305.00 |
| 8 | Income from operations | $595.00 | $649.00 |
In addition, the following sales unit volume information for the period is as follows:
| Mountain Monster | Desert Dragon | |
| Sales unit volume | 5,300 | 5,150 |
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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