Question

Skittles Inc. manufactures and sells two styles of candy, Red Chewy and Green Sucker. These candies are sold in two regions, East Coast and West Coast. Information about the two surfboards is as follows:

	Red Chewy		Green Sucker
Sales price	$350		$300
Variable cost of goods sold per unit	(130)		(138)
Manufacturing margin per unit	$220		$162
Variable selling expense per unit	(150)		(90)
Contribution margin per unit	$70		$72

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

	East Coast		West Coast
Red Chewy	2,940		1,470
Green Sucker	0		1,470

1. 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.

Skittles, Inc.

Contribution Margin by Territory

	East Coast	West Coast
Sales	$	$
	$	$
	$	$
Contribution Margin Ratio	%	%

Answer 1

Skittles, Inc.
Contribution Margin by Territory
	East Coast	West Coast
Sales	$1,029,000	$955,500
Variable cost of goods sold	382,200	393,960
Manufacturing margin	$646,800	$561,540
Variable selling expense	441,000	352,800
Contribution margin	$205,800	$208,740
Contribution Margin Ratio	20%	21.85%

East Coast

Sales= 2,940*350= $1,029,000

Variable cost of goods sold= 2,940*130= 382,200

Variable selling expense= 2,940*150= 441,000

Contribution Margin Ratio= Contribution margin*100/Sales

= $205,800*100/1,029,000= 20%

West Coast

Sales= 1,470*$350+1,470*$300= $955,500

Variable cost of goods sold= 1,470*$130+1,470*138= 393,960

Variable selling expense= 1,470*$150+1,470*$90= 352,800

Contribution Margin Ratio= Contribution margin*100/Sales

= $208,740*100/955,500= 21.85%

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