Sales Territory and Salesperson Profitability Analysls Havasu Off-Road Inc. manu

Question

Sales Territory and Salesperson Profitability Analysls 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 salesperso ns. The following sales statistics are available for each sale sperson Northeast Southwest Rene Steve Colleen Paul Average per unit: $13,000 $15,500 $9,000 S18,100 $,060 $,990 $5,530 $7,502 9% Sales price Variable cost of goods sold Commisslon rate Units sold Manufacturing margin ratio B-h 36 38% 13% 27 42% 11% 40 38% 58% 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 Contribution margin retio

Explanation / Answer

a-1. Contribution margin by sales person: Rene Steve Coleen Paul Sales (a) 468000 418500 360000 796400 (36*13000) (27*15500) (40*9000) (44*18100) Less:Variable cost of goods sold 290160 242730 223200 334488 (36*8060) (27*8990) (40*5580) (44*7602) Manufacturing margin 177840 175770 136800 461912 Sales commission 37440 54405 39600 71676 (468000*8%) (418500*13%) (360000*11%) (796400*9%) Contribution margin (b) 140400 121365 97200 390236 Contribution margin ratio (b)/(a) 30.00% 29.00% 27.00% 49.00% a-2. Interpret the report: Paul earns the Highest contribution margin and has the Highest contribution margin ratio.This is because he sells the Highest number of units, has a Second Lowest commission rate and sells a product mix with a highest manufacturing margin.Steve also sells product with a Second Highest average manufacturing margin but at a Highest commission rate.Coleen has the Lowest contribution margin ratio among the four salesperson.Although Rene has a high variable cost of goods sold and also sells product with a second Highest average sales price per unit,she has the second Highest total contribution margin. b-1. Contribution margin by Territory: Northeast Southwest Sales (a) 886500 1156400 (36*13000)+(27*15500) (40*9000)+(44*18100) Less:Variable cost of goods sold 532890 557688 (36*8060)+(27*8990) (40*5580)+(44*7602) Manufacturing margin 353610 598712 Sales commission 91845 111276 (468000*8%)+(418500*13%) (360000*11%)+(796400*9%) Contribution margin (b) 261765 487436 Contribution margin ratio (b)/(a) 29.53% 42.15% b-2. Interpret the report: The southwest region has $269900 more sales and $225671 more contribution margin.In the south west region,The sales person with the highest sales unit volume has the Highest contribution margin ratio.The southwest region has the best performance eventhough it also has the sales person with Lowest contribution margin and contribution margin ratio.The northeast region contribution margin is Lower than the southwest region because of the outstanding performance of Paul.

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