Territory and Product Profitability Analysis

The sales unit volume for the sales territories and products for the period is as follows:

a$.$ Prepare a contribution margin by sales territory report. Compute the contribution margin ratio for each territory. Round contribution margin ratio answers to two decimal places.

Pipeline Surfboards Inc.

Contribution Margin by Territory

b$.$ What advice would you give to the management of Pipeline Surfboards regarding the relative profitability of the two territories?

The total contribution margin is

for the East Coast, while the contribution margin ratio is

for West Coast. This is because East Coast sells only Atlantic Wave, which have a

: contribution margin per unit. In attempting to

improve the company's profitability, it is

that changing the mix of products to the two territories will have much effect. In addition, the variable selling expenses per unit for the

: may be too high.