Product Profitability Analysis PowerTrain Sports Inc. manufactures and sells two

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Product Profitability Analysis

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:

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

a. Prepare a contribution margin by product report. Calculate the contribution margin ratio for each product as a whole percent.

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b. What advice would you give to the management of PowerTrain Sports Inc. regarding the relative profitability of the two products?

The Desert Dragon line provides the largest total contribution margin and the largest contribution margin ratio. If the sales mix were shifted more toward the Desert Dragon line, the overall profitability of the company would increase.

Mountain Monster Desert Dragon Sales price $4,800 $2,800 Variable cost of goods sold 3,020 1,880 Manufacturing margin $1,780 $920 Variable selling expenses 964 304 Contribution margin $816 $616 Fixed expenses 380 250 Income from operations $436 $366

Explanation / Answer

Income Statement :-

........ Mountain Monster Desert Dragon

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