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% |
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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 .
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