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 $5,200.00 $5,300.00 3 Variable cost of goods sold 3,240.00 3,450.00 4 Manufacturing margin $1,960.00 $1,850.00 5 Variable selling expenses 712.00 1,108.00 6 Contribution margin $1,248.00 $742.00 7 Fixed expenses 470.00 320.00 8 Income from operations $778.00 $422.00 In addition, the following sales unit volume information for the period is as follows: Mountain Monster Desert Dragon Sales unit volume 4,800 4,650 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. PowerTrain Sports Inc. Contribution Margin by Product 1 Mountain Monster Desert Dragon 2 Revenues 3 Variable cost of goods sold 4 manufacturing margin 5 Variable selling prices 6 contribution margin 7 contribution margin ratio
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
|
1
|
|
Mountain Monster
|
Desert Dragon
|
|
2
|
Sales price
|
$5,200.00
|
$5,300.00
|
|
3
|
Variable cost of goods sold
|
3,240.00
|
3,450.00
|
|
4
|
Manufacturing margin
|
$1,960.00
|
$1,850.00
|
|
5
|
Variable selling expenses
|
712.00
|
1,108.00
|
|
6
|
Contribution margin
|
$1,248.00
|
$742.00
|
|
7
|
Fixed expenses
|
470.00
|
320.00
|
|
8
|
Income from operations
|
$778.00
|
$422.00
|
|
|
Mountain Monster
|
Desert Dragon
|
| Sales unit volume | 4,800 | 4,650 |
|
PowerTrain Sports Inc.
|
|
Contribution Margin by Product
|
|
1
|
|
Mountain Monster
|
Desert Dragon
|
|
2
|
Revenues |
|
|
|
3
|
Variable cost of goods sold |
|
|
|
4
|
manufacturing margin |
|
|
|
5
|
Variable selling prices |
|
|
|
6
|
contribution margin |
|
|
|
7
|
contribution margin ratio |
|
|
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
