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: 1 Mountain MonsterDesert Dragon2Sales price$5,400.00$5,300.003Variable cost of goods sold3,255.003,400.004Manufacturing margin$2,145.00$1,900.005Variable selling expenses1,065.00946.006Contribution margin$1,080.00$954.007Fixed expenses485.00305.008Income from operations$595.00$649.00 In addition, the following sales unit volume information for the period is as follows: Mountain MonsterDesert DragonSales unit volume5,3005,150 Required:a.Prepare a contribution margin by product report. Calculate the contribution margin ratio for each. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.b.What advice would you give to the management of PowerTrain Sports Inc. regarding the relative profitability of the two products? XContribution Margin Report a. Prepare a contribution margin by product report. Calculate the contribution margin ratio for each. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.

Contribution margin ratio = Contribution margin *100 / Sales

Answered: PowerTrain Sports Inc. manufactures and…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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:

1		Mountain Monster	Desert Dragon
2	Sales price	$5,400.00	$5,300.00
3	Variable cost of goods sold	3,255.00	3,400.00
4	Manufacturing margin	$2,145.00	$1,900.00
5	Variable selling expenses	1,065.00	946.00
6	Contribution margin	$1,080.00	$954.00
7	Fixed expenses	485.00	305.00
8	Income from operations	$595.00	$649.00

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

	Mountain Monster	Desert Dragon
Sales unit volume	5,300	5,150

Required:

a.	Prepare a contribution margin by product report. Calculate the contribution margin ratio for each. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.
b.	What advice would you give to the management of PowerTrain Sports Inc. regarding the relative profitability of the two products?

Contribution Margin Report

a. Prepare a contribution margin by product report. Calculate the contribution margin ratio for each. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.

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