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 $5,000 $3,000 Variable cost of goods sold (3,150) (2,010) Manufacturing margin $1,850 $990 Variable selling expenses (900) (570) Contribution margin $950 $420 Fixed expenses (450) (170) Operating income $500 $250 In addition, the following sales unit volume information for the period is as follows: Conquistador Hurricane Sales unit volume 3,300 2,500 a. 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 Conquistador Hurricane $fill in the blank 7e1e62fec03e009_2 $fill in the blank 7e1e62fec03e009_3 fill in the blank 7e1e62fec03e009_5 fill in the blank 7e1e62fec03e009_6 $fill in the blank 7e1e62fec03e009_8 $fill in the blank 7e1e62fec03e009_9 fill in the blank 7e1e62fec03e009_11 fill in the blank 7e1e62fec03e009_12 $fill in the blank 7e1e62fec03e009_14 $fill in the blank 7e1e62fec03e009_15 fill in the blank 7e1e62fec03e009_17% fill in the blank 7e1e62fec03e009_18% b. What advice would you give to the management of Galaxy Sports Inc. regarding the profitability of the two products? The line provides the largest total contribution margin and the largest contribution margin ratio. If the sales mix were shifted more toward the line, the overall profitability of the company would increase.
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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 | $5,000 | $3,000 | ||
| Variable cost of goods sold | (3,150) | (2,010) | ||
| Manufacturing margin | $1,850 | $990 | ||
| Variable selling expenses | (900) | (570) | ||
| Contribution margin | $950 | $420 | ||
| Fixed expenses | (450) | (170) | ||
| Operating income | $500 | $250 |
In addition, the following sales unit volume information for the period is as follows:
| Conquistador | Hurricane | |||
| Sales unit volume | 3,300 | 2,500 |
a. 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 | ||
| Conquistador | Hurricane | |
| $fill in the blank 7e1e62fec03e009_2 | $fill in the blank 7e1e62fec03e009_3 | |
| fill in the blank 7e1e62fec03e009_5 | fill in the blank 7e1e62fec03e009_6 | |
| $fill in the blank 7e1e62fec03e009_8 | $fill in the blank 7e1e62fec03e009_9 | |
| fill in the blank 7e1e62fec03e009_11 | fill in the blank 7e1e62fec03e009_12 | |
| $fill in the blank 7e1e62fec03e009_14 | $fill in the blank 7e1e62fec03e009_15 | |
| fill in the blank 7e1e62fec03e009_17% | fill in the blank 7e1e62fec03e009_18% |
b. What advice would you give to the management of Galaxy Sports Inc. regarding the profitability of the two products?
The line provides the largest total contribution margin and the largest contribution margin ratio. If the sales mix were shifted more toward the line, the overall profitability of the company would increase.
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