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 $6,200 $4,000 Variable cost of goods sold (3,910) (2,680) Manufacturing margin $2,290 $1,320 Variable selling expenses (1,112) (680) Contribution margin $1,178 $640 Fixed expenses (550) (260) Operating income $628 $380 In addition, the following sales unit volume information for the period is as follows: Conquistador Hurricane Sales unit volume 1,900 1,400 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 49de5a0ce055f93_2 $fill in the blank 49de5a0ce055f93_3 fill in the blank 49de5a0ce055f93_5 fill in the blank 49de5a0ce055f93_6 $fill in the blank 49de5a0ce055f93_8 $fill in the blank 49de5a0ce055f93_9 fill in the blank 49de5a0ce055f93_11 fill in the blank 49de5a0ce055f93_12 $fill in the blank 49de5a0ce055f93_14 $fill in the blank 49de5a0ce055f93_15 fill in the blank 49de5a0ce055f93_17% fill in the blank 49de5a0ce055f93_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 | $6,200 | $4,000 | ||
| Variable cost of goods sold | (3,910) | (2,680) | ||
| Manufacturing margin | $2,290 | $1,320 | ||
| Variable selling expenses | (1,112) | (680) | ||
| Contribution margin | $1,178 | $640 | ||
| Fixed expenses | (550) | (260) | ||
| Operating income | $628 | $380 |
In addition, the following sales unit volume information for the period is as follows:
| Conquistador | Hurricane | |||
| Sales unit volume | 1,900 | 1,400 |
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 49de5a0ce055f93_2 | $fill in the blank 49de5a0ce055f93_3 | |
| fill in the blank 49de5a0ce055f93_5 | fill in the blank 49de5a0ce055f93_6 | |
| $fill in the blank 49de5a0ce055f93_8 | $fill in the blank 49de5a0ce055f93_9 | |
| fill in the blank 49de5a0ce055f93_11 | fill in the blank 49de5a0ce055f93_12 | |
| $fill in the blank 49de5a0ce055f93_14 | $fill in the blank 49de5a0ce055f93_15 | |
| fill in the blank 49de5a0ce055f93_17% | fill in the blank 49de5a0ce055f93_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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