Reference no: EM132685869

Problem - Territory and Product Profitability Analysis

Zen Skateboards, Inc., manufactures and sells two styles of skateboards, Street Machine and Winter Warrior. These skateboards are sold in two regions, Southern and Northern. Information about the two skateboards is as follows:

	Street Machine	Winter Warrior
Sales price   Variable cost of goods sold per unit   Manufacturing margin per unit   Variable selling expense per unit   Contribution margin per unit	$250 175 $ 75 50 $ 25	$150 105 $ 45 25 $ 20

The sales unit volume for the territories and products for the period is as follows:

	Southern	Northern
Street Machine   Winter Warrior	25,000 0	12,500 12,500

Required -

a. Prepare a contribution margin by sales territory report. Calculate the contribution margin ratio for each territory as a whole percent, rounded to two decimal places.

b. What advice would you give to the management of Zen Skateboards, Inc., regarding the relative profitability of the two territories?