Reference no: EM132468468

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:

1                                        Mountain Monster              Desert Dragon

2 Sales price                                $5,500.00                  $5,300.00

3 Variable cost of goods sold           3,290.00                    3,300.00

4 Manufacturing margin                  $2,210.00                  $2,000.00

5 Variable selling expenses                1,000.00                  1,152.00

6  Contribution margin                       $1,210.00                 $848.00

7 Fixed expenses                                475.00                     320.00

8 Income from operations                      $735.00                   $528.00

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

Mountain Monster

Desert Dragon

Sales unit volume                               5,000                             4,850

Required:

Question a. Prepare a contribution margin by product report. Calculate the contribution margin ratio for each. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.

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

Amount Descriptions

Contribution margin

Contribution margin ratio

Cost of goods sold

Fixed expenses

Gross profit

Manufacturing margin

Revenues

Variable cost of goods sold

Variable selling expenses