Product Profitability Analysis
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:
| Mountain Monster | Desert Dragon | |||
| Sales price | $5,800 | $3,400 | ||
| Variable cost of goods sold | 3,650 | 2,280 | ||
| Manufacturing margin | $2,150 | $1,120 | ||
| Variable selling expenses | 990 | 508 | ||
| Contribution margin | $1,160 | $612 | ||
| Fixed expenses | 550 | 240 | ||
| Income from operations | $610 | $372 | ||
In addition, the following sales unit volume information for the period is as follows:
| Mountain Monster | Desert Dragon | |||
| Sales unit volume | 1,800 | 1,300 | ||
a. Prepare a contribution margin by product report. Calculate the contribution margin ratio for each product as a whole percent.
| PowerTrain Sports Inc. | ||
| Contribution Margin by Product | ||
| Mountain Monster | Desert Dragon | |
| Revenues | $ | $ |
| Variable cost of goods sold | ||
| Manufacturing margin | $ | $ |
| Variable selling expenses | ||
| Contribution margin | $ | $ |
| Contribution margin ratio | % | % |
a. Prepare a contribution margin by product report. Calculate the contribution margin ratio for each product as a whole percent.
| PowerTrain Sports Inc. | ||
| Contribution Margin by Product | ||
| Mountain Monster | Desert Dragon | |
| Revenues | $5800*1800 = 10440000 | $3400*1300 = 4420000 |
| Variable cost of goods sold | 3650*1800 = 6570000 | 2280*1300 = 2964000 |
| Manufacturing margin | $3870000 | $1456000 |
| Variable selling expenses | 990*1800 = 1782000 | 508*1300 = 660400 |
| Contribution margin | $2088000 | $795600 |
| Contribution margin ratio | 20% | 18% |
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