Product profitability analysis Amount Descriptions Contribution Margin Report Fi

Question

Product profitability analysis Amount Descriptions Contribution Margin Report Final Question Instructions rain Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Mountain Monster and Desert Dragon, from a single manufacturing facility. The PowerT manufacturing facility operates at 100% of capacity T e following per unit information is available for the two products. Mountain Desert Dragon Monster $5,200.00 3,240.00 1,960.00 12.00 $5,300.00 3,450.00 1,850.00 1,108.00 Sales price s Variable cost of goods sold

Explanation / Answer

Solution a:

Solution b:

On review of contribution margin by product and contribution margin ratio, it was observed that contribution margin ratio of Desert dragon is very low as compared with contribution margin ratio of mountain monster. Per unit variable cost of Desert dragon is quite high but price are not so much high when compared with price of monster mountain and its relative variable cost. Therefore it is recommended that company should focus on sale of mountain monsters more as its providing high profitablity and further reconsider the price of Desert dragon.

Power Train Sports Inc. Contribution margin by product Particulars Mountain Monsters Desert Dragon Sales $24,960,000.00 $24,645,000.00 Variable cost of goods sold $15,552,000.00 $16,042,500.00 Variable selling expenses $3,417,600.00 $5,152,200.00 Contribution margin $5,990,400.00 $3,450,300.00 Contribution margin ratio 24% 14%

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