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 $4,400 $2,800 Variable cost of goods sold (2,770) (1,880) Manufacturing margin $1,630 $920 Variable selling expenses (706) (444) Contribution margin $924 $476 Fixed expenses (430) (190) Operating income $494 $286 In addition, the following sales unit volume information for the period is as follows: Conquistador Hurricane Sales unit volume 3,600 2,700
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 | $4,400 | $2,800 | ||
| Variable cost of goods sold | (2,770) | (1,880) | ||
| Manufacturing margin | $1,630 | $920 | ||
| Variable selling expenses | (706) | (444) | ||
| Contribution margin | $924 | $476 | ||
| Fixed expenses | (430) | (190) | ||
| Operating income | $494 | $286 |
In addition, the following sales unit volume information for the period is as follows:
| Conquistador | Hurricane | |||
| Sales unit volume | 3,600 | 2,700 |
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