Question

Instructions Power Train 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 Desert Dragon 2 Sales price $5,200.00 $5,300.00 3 Variable cost of goods sold 3,240.00 3,450.00 4 Manufacturing margin $1,960.00 $1,850.00 5 Variable selling expenses 712.00 1,108.00

Answer 1

a.

Computation for Contribution Margin and Contribution Margin Ratio
Products	Mountain Monster	Desert Dragon
Sales Value	$5,200	$5,300
Less: Variable Cost	($3,240)	($3,450)
Less: Variable selling expense	($712)	($1,108)
Contribution Margin (a)	$1,248	$742
Contribution Margin Ratio (a/sales value)	24%	14%

b.

The Mountain Monster line provides the ­­­­­­­­larger total contribution margin and the larger contribution margin ratio. If the sales mix were shifted more toward the Mountain Monster line, the overall profitability of the company would increase.