Problem - Product Profitability Analysis

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Problem - Product Profitability Analysis

Outdoor Motor Sports Inc. manufactures and sells two styles of ATVs, 4-wheel drive (4WD) and 2-wheel drive (2WD), from a single manufacturing facility. The manufacturing facility operates at 100% of capacity. The following per unit information is available for the two products:

 

4WD

2WD

Sales price  

Variable cost of goods sold  

Manufacturing margin  

Variable selling expenses  

Contribution margin  

Fixed expenses  

Income from operations  

$5,250

3,100

$2,150

890

$1,260

460

$800

$3,250

2,100

$1,150

500

$ 650

200

$450

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

 

4WD

2WD

Sales unit volume

3,100

2,500

Required -

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

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

Reference no: EM132685862

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