Question

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	$5,300.00	$5,300.00
3	Variable cost of goods sold	3,210.00	3,350.00
4	Manufacturing margin	$2,090.00	$1,950.00
5	Variable selling expenses	1,030.00	1,102.00
6	Contribution margin	$1,060.00	$848.00
7	Fixed expenses	470.00	305.00
8	Income from operations	$590.00	$543.00

In addition, the following sales unit volume information for the period is as follows:

	Mountain Monster	Desert Dragon
Sales unit volume	4,800	4,650

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?

Accounte descriptions:

Amount Descriptions
Contribution margin
Contribution margin ratio
Cost of goods sold
Fixed expenses
Gross profit
Manufacturing margin
Revenues
Variable cost of goods sold
Variable selling expenses

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.

PowerTrain Sports Inc.

Contribution Margin by Product

1		Mountain Monster	Desert Dragon
2
3
4
5
6
7

b. What advice would you give to the management of PowerTrain Sports Inc. regarding the relative profitability of the two products?

The Mountain Monster line provides the   total contribution margin and the     contribution margin ratio. If the sales mix were shifted more toward the     line, the overall profitability of the company would increase.

Answer 1