Sales Territory and Salesperson Profitability Analysis

Havasu Off-Road Inc. manufactures and sells a variety of commercial vehicles in the Northeast and Southwest regions. There are two salespersons assigned to each territory. Higher commission rates go to the most experienced salespersons. The following sales statistics are available for each salesperson:

Line Item Description	Northeast Rene	Northeast Steve	Southwest Colleen	Southwest Paul
Average per unit:
Sales price	$15,500	$16,000	$14,000	$18,000
Variable cost of goods sold	$9,300	$8,000	$8,400	$9,000
Commission rate	8%	12%	10%	8%
Units sold	36	24	40	60
Manufacturing margin ratio	40%	50%	40%	50%

Question Content Area

a. 1.Prepare a contribution margin by salesperson report. Compute the contribution margin ratio for each salesperson.

Line Item Description	Rene	Steve	Colleen	Paul
Contribution marginManufacturing marginSalesVariable cost of goods soldVariable commission expense	$- Select -	$- Select -	$- Select -	$- Select -
Contribution marginManufacturing marginSalesVariable cost of goods soldVariable commission expense	- Select -	- Select -	- Select -	- Select -
Contribution marginManufacturing marginSalesVariable cost of goods soldVariable commission expense	$- Select -	$- Select -	$- Select -	$- Select -
Contribution marginManufacturing marginSalesVariable cost of goods soldVariable commission expense	- Select -	- Select -	- Select -	- Select -
Contribution marginManufacturing marginSalesVariable cost of goods soldVariable commission expense	$- Select -	$- Select -	$- Select -	$- Select -
Contribution margin ratio	Contribution margin ratio%	Contribution margin ratio%	Contribution margin ratio%	Contribution margin ratio%

Question Content Area

a. 2.Interpret the report. Paul earns the fill in the blank 1 of 10

highestlowest

contribution margin and has the fill in the blank 2 of 10

highestlowest

contribution margin ratio. This is because he sells the fill in the blank 3 of 10

mostleast

units, has a fill in the blank 4 of 10

highlow

commission rate, and sells a product mix with a fill in the blank 5 of 10

highlow

manufacturing margin. Steve also sells products with a fill in the blank 6 of 10

highlow

average manufacturing margin but at a fill in the blank 7 of 10

highlow

commission rate. Colleen has the fill in the blank 8 of 10

bestpoorest

contribution margin ratio among the four salespersons. Although Rene has a high variable cost of goods sold and also sells products with a fill in the blank 9 of 10

highlow

average sales price per unit, she has the second fill in the blank 10 of 10

highestlowest

total contribution margin.

Question Content Area

b. 1.Prepare a contribution margin by territory report. Compute the contribution margin for each territory as a percent, rounded to one decimal place.

Line Item Description	Northeast	Southwest
	$- Select -	$- Select -
	- Select -	- Select -
	$- Select -	$- Select -
	- Select -	- Select -
	$- Select -	$- Select -
Contribution margin ratio	Contribution margin ratio%	Contribution margin ratio%

Question Content Area

b. 2.Interpret the report. The Southwest Region has fill in the blank 1 of 7$ more sales and fill in the blank 2 of 7$ more contribution margin. In the Southwest Region, the salesperson with the highest sales unit volume, has the fill in the blank 3 of 7

highestlowest

contribution margin ratio. The Southwest Region has the fill in the blank 4 of 7

highestlowest

performance, even though it also has the salesperson with the fill in the blank 5 of 7

highestlowest

contribution margin ratio. The Northeast Region contribution margin is fill in the blank 6 of 7

moreless

than the Southwest Region because of the outstanding performance of fill in the blank 7 of 7

PaulColleen

.