Question

Territory and Product Profitability Analysis Coast to Coast Surfboards Inc. manufactures and sells two styles of surfboards, Atlantic Wave and Pacific Pounder. These surfboards are sold in two regions, East Coast and West Coast. Information about the two surfboards is as follows: Atlantic Wave Sales price $400 (148) Pacific Pounder $350 (165) Variable cost of goods sold per unit $252 $185 Manufacturing margin per unit Variable selling expense per unit (172) (101) Contribution margin per unit $80 $84 The sales unit volume for the territories and products for the period is as follows: East Coast West Coast 2,400 1,200 Atlantic Wave Pacific Pounder 0 1,200
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Answer 1

Coast to Coast Surfboards Inc. Contribution Margin by Territory East Coast West Coast Sales $960,000 $900,000 --> (a) Variable cost of goods sold $355,200 $375,600 Manufacturing margin $1,315,200 $1,275,600 Variable selling expenses $412,800 $327,600 Contribution margin $1,728,000 $1,603,200 -->(b) Contribution margin ratio 180.00% 178.13% --> (a)/(b) NOTE: Contribution margin ratio = Contribution margin / Sales.

Workings: Sales for East Coast = (2400 x $400) + (0 x $350) = $960000; Sales for West Coast = (1200 x $400) + (1200 x $350) = $900000; Variable cost of goods sold for East Coast = (2400 x-$148) + (0 x-$165) = -$355200; Variable cost of goods sold for West Coast = (1200 x-$148) + (1200 x $165) = -$375600; Variable selling expenses for East Coast = (2400 x-$172) + (0 x-$101) = -$412800; Variable selling expenses for West Coast = (1200 x-$172) + (1200 x-$101) = -$327600; Contribution margin ratio for East Coast $1728000 / $960000 = 180.00%; Contribution margin ratio for West Coast $1603200 / $900000 = 178.13%;