Question

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:

Mountain Monster
Sales price $5,400
Variable cost of goods $3,285
Manufacturing margin $2,115
Variable selling expenses $1,035
Contribution margin $1,080
Fixed expenses $485
Income from operations $595
Desert Dragon
Sales price $5,250
Variable cost of goods sold $3,400
Manufacturing margin $1,850
Variable selling expenses $905
Contribution margin $945
Fixed expenses $310
Income from operations $635.00

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

Sales unit volume 5,000
Desert Dragon
Sales unit volume 4,850

a. Prepare a contribution margin by product report.
b. Calculate the contribution margin ratio for each product as a percent, rounded to one decimal place.
c. Calculate the contribution margin ratio for each product as a percent, rounded to one decimal place.

Answer 1

Contribution margin ratio Mountain Monster *100= 20.0 %

Contribution margin ratio Desert Dragon * 100= 18.00%

Step-by-step explanation:

PowerTrain Sports Inc.

Contribution Margin

Product Report

Mountain Monster, Desert Dragon

Sales price $5,400 $5,250

Variable cost of goods $3,285 $3,400

Manufacturing margin $2,115 $1,850

Variable selling expenses $1,035 $905

Contribution margin $1,080 $945

Fixed expenses $485 $310

Income from operations $595 $635.00

b.Contribution margin ratio= Contribution Margin / Sale

Contribution margin ratio= Sales - Variable Costs / Sale

b. Contribution margin ratio Mountain Monster *100=

=1080/5400 * 100= 0.2*100= 20.0 %

b.Contribution margin ratio Desert Dragon * 100=

=945/5250* 100 = 0.18*100= 18.00%

c.Contribution margin ratio Mountain Monster *100=

=1080/5400 * 100= 0.2*100= 20.0 %

c.Contribution margin ratio Desert Dragon * 100=

=945/5250* 100 = 0.18*100= 18.00%