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

Question

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 Variable cost of goods sold Commission rate Units sold Manufacturing margin ratio $12,000 ?14,900 8,800 18,000 $7,200 $8,940 $5,456 $10,080 8% 50 44% 13% 12% 40 38% 8% 40% 40% 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 ratio | |% | |% | % | |% a. 2. Interpret the report. Paul earns the contribution margin and has the ? contribution margin ratio. This is because he sells the units, has a commission rate, and sells a product mix with a manufacturing margin. Steve also sells products with average manufacturing margin but at a commission rate. Colleen has the ? contribution margin ratio among the four salespersons. Although Rene has a high variable cost of goods sold and also sells products

Explanation / Answer

a1. Rene Steeve Collin Paul Sale (Unit*Selling Price) 360000 357600 352000 900000 Less: Variable Cost of Goods Sold 216000 214560 218240 504000 Manufacturing Margin 144000 143040 133760 396000 Less: Commission (Sale*%) 28800 46488 42240 72000 Contribution Margin 115200 96552 91520 324000 Contribution Margin Ratio (Cont Margin/Sale) 32 27 26 36 a2. Paul earn the 324000 Contribution Margin and has the 36% contribution margin ratio. This is because he sell the 50 units and has 8% commission rate and sells a product mix with a 396000 manufacturing Margin. Steve also sells product with a 143040 average manufacgturin margin but at a 13% commission rate. collin has the lowest contributuion margin ratio among all the four sales person. Although Rene has high variable cost and also sells product with a 12000 average sales price per unit , she has the second best/highest total contribution margin. b1. Rene+Steve Collin+Paul Northeast southwest Sale (Unit*Selling Price) 717600 1252000 534400 Less: Variable Cost of Goods Sold 430560 722240 Manufacturing Margin 287040 529760 Less: Commission (Sale*%) 75288 114240 Contribution Margin 211752 415520 203768 Contribution Margin Ratio (Cont Margin/Sale)                 29.5               33.2 b2. Soutwest region has $ 534400 more sale and $ 203768 more margin. 36% Better lowest Lower paul

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