. Prepare a contribution margin by product report. Compute the contribution margin ratio for each product as a whole percent. Galaxy Sports Inc.Contribution Margin by Product
. Prepare a contribution margin by product report. Compute the contribution margin ratio for each product as a whole percent. Galaxy Sports Inc.Contribution Margin by Product
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Product Profitability Analysis
Galaxy Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Conquistador and Hurricane, from a single manufacturing facility. The manufacturing facility operates at 100% of capacity. The following per-unit information is available for the two products:
Conquistador | Hurricane | |||
Sales price | $5,600 | $3,400 | ||
Variable cost of goods sold | (3,530) | (2,280) | ||
Manufacturing margin | $2,070 | $1,120 | ||
Variable selling expenses | (782) | (644) | ||
Contribution margin | $1,288 | $476 | ||
Fixed expenses | (610) | (190) | ||
Operating income | $678 | $286 |
In addition, the following sales unit volume information for the period is as follows:
Conquistador | Hurricane | |||
Sales unit volume | 3,300 | 2,400 |
a. Prepare a contribution margin by product report. Compute the contribution margin ratio for each product as a whole percent.
Conquistador | Hurricane | |
|
$Sales | $Sales |
|
Variable cost of goods sold | Variable cost of goods sold |
|
$Manufacturing margin | $Manufacturing margin |
|
Variable selling expenses | Variable selling expenses |
|
$Contribution margin | $Contribution margin |
|
Contribution margin ratio% | Contribution margin ratio% |
b. What advice would you give to the management of Galaxy Sports Inc. regarding the profitability of the two pro
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