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: Sales price Variable cost of goods sold Manufacturing margin Variable selling expenses Contribution margin Fixed expenses Operating income Conquistador Hurricane $5,000 $3,200 (3,150) Sales unit volume $1,850 (700) $1,150 (540) $610 (2,140) 2,700 $1,060 (420) $640 In addition, the following sales unit volume information for the period is as follows: Conquistador Hurricane (260) % $380 1,900 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 Line Item Description Conquistador Hurricane $ % b. What advice would you give to the management of Galaxy Sports Inc. regarding the profitability of the two products? The the line provides the largest total contribution margin and the largest contribution margin ratio. If the sales mix were shifted more towa line, the overall profitability of the company would increase.
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: Sales price Variable cost of goods sold Manufacturing margin Variable selling expenses Contribution margin Fixed expenses Operating income Conquistador Hurricane $5,000 $3,200 (3,150) Sales unit volume $1,850 (700) $1,150 (540) $610 (2,140) 2,700 $1,060 (420) $640 In addition, the following sales unit volume information for the period is as follows: Conquistador Hurricane (260) % $380 1,900 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 Line Item Description Conquistador Hurricane $ % b. What advice would you give to the management of Galaxy Sports Inc. regarding the profitability of the two products? The the line provides the largest total contribution margin and the largest contribution margin ratio. If the sales mix were shifted more towa line, the overall profitability of the company would increase.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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:
Sales price
Variable cost of
goods sold
Manufacturing
margin
Variable selling
expenses
Contribution
margin
Fixed expenses
Operating
income
Conquistador Hurricane
$5,000
$3,200
Sales unit
volume
(3,150)
$1,850
(700)
$1,150
(540)
$610
2,700
(2,140)
$1,060
$
(420)
In addition, the following sales unit volume information for the period is as follows:
Conquistador Hurricane
$640
(260)
%
$380
1,900
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
Line Item Description Conquistador Hurricane
$
$
$
%
b. What advice would you give to the management of Galaxy Sports Inc. regarding the profitability of the two products?
The
the
line provides the largest total contribution margin and the largest contribution margin ratio. If the sales mix were shifted more toward
line, the overall profitability of the company would increase.
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