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:

	Northeast				Southwest
	Rene		Steve		Colleen		Paul
Average per unit:
Sales price	$11,600		$15,500		$9,800		$18,800
Variable cost of goods sold	$7,424		$8,990		$6,076		$10,528
Commission rate	7%		14%		11%		8%
Units sold	30		24		40		46
Manufacturing margin ratio	36%		42%		38%		44%

a. 1. Prepare a contribution margin by salesperson report. Calculate the contribution margin ratio for each salesperson. If required, round contribution margin ratio to one decimal place.

Havasu Off-Road Inc.
Contribution Margin by Salesperson
	Rene	Steve	Colleen	Paul
Sales	$	$	$	$
Variable cost of goods sold
Manufacturing margin	$	$	$	$
Variable commission expense
Contribution margin	$	$	$	$
Contribution margin ratio	%	%	%	%

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

Havasu Off-Road Inc.
Contribution Margin by Territory
	Northeast	Southwest
Sales	$	$
Variable cost of goods sold
Manufacturing margin	$	$
Variable commission expense
Contribution margin	$	$
Contribution margin ratio	%	%

b. 2. Interpret the report.

The Southwest Region has $ more sales and $ more contribution margin. In the Southwest Region, the salesperson with the highest sales unit volume, has the highest contribution margin ratio. The Southwest Region has the highest performance, even though it also has the salesperson with the lowest contribution margin and contribution margin ratio. The Northeast Region contribution margin is less than the Southwest Region because of the outstanding performance of Paul .