Question

Product Profitability Analysis

PowerTrain 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 available for the two products:

	Mountain Monster		Desert Dragon
Sales price	$6,200		$4,000
Variable cost of goods sold	3,910		2,680
Manufacturing margin	$2,290		$1,320
Variable selling expenses	1,360		480
Contribution margin	$930		$840
Fixed expenses	440		340
Income from operations	$490		$500

In addition, the following sales unit volume information for the period is as follows:

	Mountain Monster		Desert Dragon
Sales unit volume	2,800		2,000

a. Prepare a contribution margin by product report. Calculate the contribution margin ratio for each product as a whole percent.

PowerTrain Sports Inc.
Contribution Margin by Product
	Mountain Monster	Desert Dragon
	$	$
	$	$
	$	$
	%	%

Answer 1

	Mountain Monster	Desert Dragon
Revenues	17360000	8000000
Variable Cost of goods sold	10948000	5360000
Manufacturing margin	6412000	2640000
Variable selling expenses	3808000	960000
Contribution margin	2604000	1680000
Contribution margin ratio	15%	21%
Formulas used:
Revenues	=2800*6200	=2000*4000
Variable Cost of goods sold	=2800*3910	=2000*2680
Variable selling expenses	=2800*1360	=2000*480