Question

1. 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	$15,500		$16,000		$14,000		$18,000
   Variable cost of goods sold	$9,300		$8,000		$8,400		$9,000
   Commission rate	8%		12%		10%		8%
   Units sold	36		24		40		60
   Manufacturing margin ratio	40%		50%		40%		50%

   a. 1. Prepare a The excess of sales over variable costs.contribution margin by salesperson report. Compute the contribution margin ratio for each salesperson.

   Havasu Off-Road Inc.
   Contribution Margin by Salesperson
   	Rene	Steve	Colleen	Paul
   Sales Contribution margin Manufacturing margin Sales Variable cost of goods sold Variable commission expense	$	$	$	$
   Variable cost of goods sold Contribution margin Manufacturing margin Sales Variable cost of goods sold Variable commission expense
   Manufacturing margin Contribution margin Manufacturing margin Sales Variable cost of goods sold Variable commission expense	$	$	$	$
   Variable commission expense Contribution margin Manufacturing margin Sales Variable cost of goods sold Variable commission expense
   Contribution margin Contribution margin Manufacturing margin Sales Variable cost of goods sold Variable commission expense	$	$	$	$
   Contribution margin ratio	%	%	%	%

   Feedback

   a. 1. To recast the contribution margin data by salesperson report, multiply the sales volume by each per unit amount. To calculate the contribution margin ratio, divide the contribution margin by sales.

   a. 2. Consider the impact the level of sales and the amount of the variable costs have on each salesperson's contribution margin ratio.

   b. 1. Prepare a contribution margin by territory report. Compute the contribution margin for each territory as a percent, rounded to one decimal place.

   Havasu Off-Road Inc.
   Contribution Margin by Territory
   	Northeast	Southwest
   Sales Contribution margin Manufacturing margin Sales Variable cost of goods sold Variable commission expense	$	$
   Variable cost of goods sold Contribution margin Manufacturing margin Sales Variable cost of goods sold Variable commission expense
   Manufacturing margin Contribution margin Manufacturing margin Sales Variable cost of goods sold Variable commission expense	$	$
   Variable commission expense Contribution margin Manufacturing margin Sales Variable cost of goods sold Variable commission expense
   Contribution margin Contribution margin Manufacturing margin Sales Variable cost of goods sold Variable commission expense	$	$
   Contribution margin ratio	%	%

   b. 1. Combine salesperson data for each territory and then recalculate the contribution margin ratio by dividing the contribution margin by sales.

   b. 2. Interpret the report.

   The Southwest Region has $    more sales and $    more contribution margin. In the Southwest Region, the salesperson with the highest sales unit volume, has the highest

Answer 1

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Part a1		Rene	Steve	Colleen	Paul
Sale		$       558,000	$        384,000	$     560,000	$   1,080,000
Variable Cost of Goods Sold		$      -334,800	$      -192,000	$   -336,000	$     -540,000
Manufacturing Margin		$       223,200	$        192,000	$     224,000	$       540,000
Variable Commission Expense	% of Sale	$        -44,640	$         -46,080	$     -56,000	$       -86,400
Contribution Margin		$       178,560	$        145,920	$     168,000	$       453,600
Contribution Margin Ratio	CM/Sale	32.00%	38.00%	30.00%	42.00%
Part a2
Highest
Highest
Most
Low
Higher
High
High
Low
Low
Highest
Part b1		Northwest	Southwest
Sale		$       942,000	$    1,640,000
Variable Cost of Goods Sold		$      -526,800	$      -876,000
Manufacturing Margin		$       415,200	$        764,000
Variable Commission Expense	% of Sale	$        -90,720	$      -142,400
Contribution Margin		$       324,480	$        621,600
Contribution Margin Ratio	CM/Sale	34.45%	37.90%
Part b2
$                                                       698,000
$                                                       297,120
Highest
Highest
Lowest
Less
Paul