Question

In: Accounting

PowerTrain Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Mountain Monster...

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

$5,200.00

$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

6

Contribution margin

$1,248.00

$742.00

7

Fixed expenses

470.00

320.00

8

Income from operations

$778.00

$422.00

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

Mountain Monster

Desert Dragon
Sales unit volume 4,800 4,650

Required:

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.
b.

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

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.

Solutions

Expert Solution

1

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.

Power Train Sports Inc.

Contribution Margin by Product

Mountain Monster

Desert Dragon

Total (in $)

Total (in $)

Sale price

24,960,000

24,645,000

Variable cost of goods sold

15,552,000

16,042,500

Manufacturing margin

9,408,000

8,602,500

Variable selling expenses

3,417,600

5,152,200

Contribution margin

5,990,400

3,450,300

Fixed expenses

2,256,000

1,488,000

Income from operations

3,734,400

1,962,300

Working notes for the above answer is as under

_______________________________________________

2

As we can see from the above table that mountain monster line provides the higher contribution margin and . If the company shift it sales mix were more toward the mountain monster line, the overall profitability of the company would increase.

ekkarill92 answered 2 years ago
Next > < Previous

Related Solutions

PowerTrain Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Mountain Monster...
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...
PowerTrain Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Mountain Monster...
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 $5,200.00 $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 6 Contribution margin $1,248.00 $742.00 7 Fixed expenses 470.00...
Ducet Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Monster and...
Ducet Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Monster and 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 Monster Dragon 2 Sales price $5,400.00 $5,300.00 3 Variable cost of goods sold 3,255.00 3,400.00 4 Manufacturing margin $2,145.00 $1,900.00 5 Variable selling expenses 1,065.00 946.00 6 Contribution margin $1,080.00 $954.00 7 Fixed expenses 485.00 305.00 8 Income from...
Hawthorn Corporation manufactures custom all-terrain vehicles (ATVs) and uses a job costing system to as- sign...
Hawthorn Corporation manufactures custom all-terrain vehicles (ATVs) and uses a job costing system to as- sign and track costs. March's beginning inventory consisted of the following components: Raw materials             Work in process          Finished goods $65,000                            27,000                       80,000 The above beginning work in process consisted only of Job #02.778. The finished goods inventory consisted of Job #01.987 ($42,500) and Job #02.665 ($37,500). The following transactions occurred during March: Purchased $112,000 of raw materials. Used $117,000 of raw...
Polarix is a retailer of ATVs (all-terrain vehicles) and accessories. An income statement for its Consumer...
Polarix is a retailer of ATVs (all-terrain vehicles) and accessories. An income statement for its Consumer ATV Department for the current year follows. ATVs sell for $4,000 each. Variable selling expenses are $210 per ATV. The remaining selling expenses are fixed. Administrative expenses are 50% variable and 50% fixed. The company does not manufacture its own ATVs; it purchases them from a supplier for $1,830 each. POLARIX Income Statement—Consumer ATV Department For Year Ended December 31, 2017 Sales $ 652,000...
Kuantan ATV, Inc. assembles five different models of all-terrain vehicles (ATVs) from various ready-made components to...
Kuantan ATV, Inc. assembles five different models of all-terrain vehicles (ATVs) from various ready-made components to serve the Las Vegas, Nevada, market. The company uses the same engine for all its ATVs. The purchasing manager, Ms. Jane Kim, needs to choose a supplier for engines for the coming year. Due to the size of the warehouse and other administrative restrictions, she must order the engines in lot sizes of 1,000 each. The unique characteristics of the standardized engine require special...
Acme Outdoors Co. is introducing a new line of sport all-terrain vehicles (ATVs). Acme is considering...
Acme Outdoors Co. is introducing a new line of sport all-terrain vehicles (ATVs). Acme is considering program proposals from two competing companies: A & B. A's marketing plan is expected to generate high sales with a 75% probability and only a 25% likelihood of low sales. An alternative marketing plan from company B could result in an initial 60% likelihood of high ATV sales and 40% probability of low sales. But company B's offer also contains a provision for an...
4. (5 pts) Acme Outdoors Co. is introducing a new line of sport all-terrain vehicles (ATVs)....
4. (5 pts) Acme Outdoors Co. is introducing a new line of sport all-terrain vehicles (ATVs). Acme is considering marketing program proposals from two competing companies: A & B. A's marketing plan is expected to generate high sales with a 75% probability and only a 25% likelihood of low sales.   An alternative marketing plan from company B could result in an initial 60% likelihood of high ATV sales and 40% probability of low sales. But company B's offer also contains...
Landmark Systems Inc. designs and manufactures global positioning navigation systems for all-terrain vehicles and watercraft. It...
Landmark Systems Inc. designs and manufactures global positioning navigation systems for all-terrain vehicles and watercraft. It has two support departments: Design and Engineering; and, two production departments, Vehicle Systems and Water Craft Systems. The budgeted level of service relationships at the start of the year was: Used by: Design Engineering Vehicles Water Craft Supplied by:   Design 0.10 0.40 0.50   Engineering 0.05 0.35 0.60 Landmark Systems Inc. collects fixed costs and variable costs of each support department in separate pools. The...
7. A company that manufactures brakes for cars has just released a line of all-terrain vehicles....
7. A company that manufactures brakes for cars has just released a line of all-terrain vehicles. Using the same research and findings from the development of the ATV brakes, the manufacturer is redesigning its car brakes. By sharing the research across the business units for both vehicles, the company is increasing company profitability through: a.economies of scope. b. commonalities. c. product bundling. d. restructuring. 8. To pursue a diversification strategy, managers must have the ability to: a.outsell all of the...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT