Territory and Product Protability Analysis Coast to Coast Surfboards Inc. manufactures and sells two styles of surfboards, Atlantic Wave and Pacific Pounder. These surfboards are sold in two regions, East Coast and West Coast. Information about the two surfboards is as follows: Atlantic Wave Pacific Founder Sales price $350 $300 Variable cost of goods sold per unit (130) (141) Manufacturing margin per unit $220 $159 Variable selling expense per unit (157) (75) Contribution margin per unit $63 $34 The sales unit volume for the territories and products for the period is as follows: East Coast West Coast Atlantic Wave 2,780 1,390 Pacific Pounder 0 1,390 3. Prepare a contribution margin by sales territory report. Compute the contribution margin ratio for each territory as a whole percent, rounded to two decimal places, if required. Coast to Coast Surfboards Inc. Contribution Margin by Territory East Coast West Coast v a: m Pacific Pounder 0 1,390 a. Prepare a contribution margin by sales territory report. Compute the contribution margin ratio for each territory as a whole percent, rounded to two decimal places, if required. Coast to Coast Surfboards Inc. Contribution Margin by Territory East Coast West Coast m We D NEEDED BI llll Contribution margin ratio b. What advice would you give to the management of Coast to Coast Surfboards regarding the relative profitability of the two territories? The total contribution margin is V for the East Coast, while the contribution margin ratio is V for West Coast. This is because East Coast sells only Atlantic Wave, which have a V contribution margin ratio but a V 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. Segment Contribution Margin Analysis The operating revenues of the three largest business segments for Time Warner, Inc., for a recent year follow. Each segment includes a number of businesses, examples of which are indicated in parentheses. Time Warner, Inc. Segment Revenues (in millions) Turner (cable networks and digital media) $30,000 Home Box Office (pay television) 47,600 Warner Bros. (films, television, and videos) 46,800 Assume that the variable costs as a percent of sales for each segment are as follows: Turner 22% Home Box Office 51% Warner Bros. 40% a. Determine the contribution margin and contribution margin ratio for each segment from the information given. When required, round to the nearest whole millionth (for example, round 5,688.7 to 5,689). Round contribution margin ratio to whole percents for each segment from the information given. Turner Home Box Office Warner Bros. Revenues Variable costs Contribution margin Contribution margin ratio (as a percent)Home Box Office (pay television) 47,600 Warner Bros. (films, television, and videos) 46,800 Assume that the variable costs as a percent of sales for each segment are as follows: Turner 22% Home Box Office 51% Warner Bros. 40% a. Determine the contribution margin and contribution margin ratio for each segment from the information given. When required, round to the nearest whole millionth (for example, round 5,688.7 to 5,689). Round contribution margin ratio to whole percents for each segment from the information given. Turner Home Box Office Warner Bros. Revenues Variable costs Contribution margin Contribution margin ratio (as a percent) % b. Does your answer to (a) mean that the other segments are more profitable businesses? The higher contribution margin ratio of a segment should not be interpreted as being the profitable segment. If the volume of business is not sufficient to exceed the break-even point, then the segments would be . In the final analysis, the fixed costs also should be considered in determining the overall profitability of the segments. The shows how sensitive the profit will be to changes in volume