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: 1 Mountain Monster Desert Dragon 2 Sales price $5,400.00 $5,225.00 3 Variable cost of goods sold 3,290.00 3,500.00 4 Manufacturing margin $2,110.00 $1,725.00 5 Variable selling expenses 1,030.00 889.00 6 Contribution margin $1,080.00 $836.00 7 Fixed expenses 475.00 315.00 8 Income from operations $605.00 $521.00 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. PowerTrain Sports Inc. Contribution Margin by Product 1 Mountain Monster Desert Dragon 2 3 4 5 6 7 b. What advice would you give to the management of PowerTrain Sports Inc. regarding the relative profitability of the two products? The Mountain Monster line provides the total contribution margin and the contribution margin ratio. If the sales mix were shifted more toward the line, the overall profitability of the company would increase.

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

Answer 1

a)
PowerTrain Sports Inc
Sales unit volume	5200	5050
Amount Descriptions	Mountain Monster	Desert Dragon
Revenues	$ 28,080,000.00	$ 26,386,250.00
Variable cost of goods sold	$ 17,108,000.00	$ 17,675,000.00
Manufacturing margin	$ 10,972,000.00	$   8,711,250.00
Variable selling expenses	$   5,356,000.00	$   4,489,450.00
Contribution margin	$   5,616,000.00	$   4,221,800.00
Contribution margin ratio	20.00%	16.00%
b)
The Mountain Monster line provides the total contribution margin and the contribution margin ratio. If the sales mix were shifted more toward the line, the overall profitability of the company would increase

2 a) 3 PowerTrain Sports Inc 4 Sales unit volume 5200 5050 5 Amount Descriptions 6 Revenues 7 Variable cost of goods sold 8 Manufacturing margin 9 Variable selling expenses 10 Contribution margin 11 Contribution margin ratio Mountain Monster =5400*5200 =3290*5200 =B6-B7 =1030*5200 =B8-B9 =B10/B6 Desert Dragon =5225*5050 =3500*5050 =C6-C7 =889*5050 =C8-C9 =C10/C6 13 b) The Mountain Monster line provides the total contribution margin and the contribution margin ratio. If the sales mix were shifted more toward the line, the overall profitability of 14 the company would increase