Question

Yower Train 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 ivailable for the two products: Mountain Monster Desert Dragon Sales price $5,200.00 $5,300.00 Variable cost of goods sold 3,240.00 3,450.00 Manufacturing margin $1,850.00 $1,960.00 712.00 Variable selling expenses 1.108.00 Contribution margin $1,248.00 $742.00 Fixed expenses 470.00 320.00 Income from operations $778.00 $422.00 n addition, the following sales unit volume information for the period is as follows: Mountain Monster Desert Dragon Sales unit volume 4,800 4,650

Answer 1

a. Prepare a contribution margin by product report. Calculate the contribution margin ratio for each. PowerTrain Sports Inc. Contribution Margin by Product Mountain Desert Monster Dragon 2 Revenues $24,960,000 $24,645,000 3 Variable cost of goods sold 15,552,000 16,042,500 4 Manufacturing margin $9,408,000 $8,602,500 5 Variable selling expenses 3,417,600 5,152,200 | 6 Contribution margin $5,990,400 $3,450,300 7 Contribution margin ratio 24.0% 14.0% Explanation:

$24,960,000 $15,552,000 $9,408,000 $3,417,600 $5,990,400 Mountain Monster Revenues (4,800 units * $5,200.00 per unit) = Less: Variable cost of goods sold (4,800 units * $3,240.00 per unit) = Manufacturing margin ($24,960,000 - $15,552,000) = Less: Variable selling expenses (4,800 units * $712.00 per unit) = Contribution margin ($9,408,000 – $3,417,600) = Contribution margin ratio = (Contribution margin / Total revenue) Contribution margin ratio = ($5,990,400 / $24,960,000) Contribution margin ratio = 24% Desert Dragon Revenues (4,650 units * $5,300.00 per unit) = Less: Variable cost of goods sold (4,650 units * $3,450.00 per unit) = Manufacturing margin ($24,645,000 - $16,042,500) = Less: Variable selling expenses (4,650 units * $1,108.00 per unit) = Contribution margin ($8,602,500 – $5,152,200) = Contribution margin ratio = (Contribution margin / Total revenue) Contribution margin ratio = ($3,450,300 / $24,645,000) Contribution margin ratio = 14% $24,645,000 $16,042,500 $8,602,500 $5,152,200 $3,450,300