PowerTrain Sports Inc. manufactures and sells two styles of All Terrain Vehicles

Question

PowerTrain Sports Inc. manufactures and sells two styles of All Terrain Vehicles ATVs capacity. The following per-unit information is available for the two products the Mountain Monster and Desert Dragon, from a single manufacturing facility. The manufacturing facility operates at 100% of Mountain Monster Desert Dragon Sales price Variable cost of goods sold Manufacturing margin Varlable sell ng expenses Contribution mergin Fixed expenses Income from operations In addition, the following sales unit volume information for the period is as follows $4,200 2,550 $1,550 836 5714 340 5374 $2,600 1,740 $860 $442 180 $262 Mountain Monster Desert Dragon Sales unit volume 2,100 1,500 a. Prepare a contribution margin by product report. Calculate the contrlbution margin ratio for each product as a whole percent. PowerTrain Sports Inc. Contribution Margin by Product Mountain Monster Desert Dragon b. What advice would you give to the management of PowerTraln Sports Inc. regarding the relatlve profitabllity of the two products? The of the company would increase 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

Explanation / Answer

(a)

POWER TRAIN SPORTS INC

CONTRIBUTION MARGIN BY PRODUCT

                                               Mountain Monster        Desert Dragon

Sales                                                 88,20,000             39,00,000

Less ; variable cost of goods sold    55,65,000             26,10,000

Manufacturing Margin                      32,55,000             12,90,000

Less:Variable Selling Expenses 17,55,600             6,27,000

Contribution Margin                       14,99,400             6,63,000

                                               

Contribution Margin (%) 17%                     17%

(b) The MOUNTAIN MOSTER Line provides the largest total contribution and the largest contribution margin ratio. If the sales mix were shifted more towards the DESERT DRAGON Line, The overall profitability of the company would increase

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