Question

Walthman Industries Inc. employs seven salespersons to sell and distribute its product throughout the state. Data taken from reports received from the salespersons during the year ended December 31 are as follows:

Salesperson	Total Sales		Variable Cost of Goods Sold			Variable Selling Expenses
Case	$366,000		$161,040			$54,900
Dix	528,000		300,960			68,640
Johnson	581,000		313,740			92,960
LaFave	448,000		255,360			58,240
Orcas	389,000		140,040			62,240
Sussman	323,000		171,190			54,910
Willbond	422,000		143,480			75,960

Required:

1. Prepare a table indicating contribution margin, variable cost of goods sold as a percent of sales, variable selling expenses as a percent of sales, and contribution margin ratio by salesperson. Round percents to the nearest whole number. Enter all amounts as positive numbers.

Waltham Industries Inc.
Salespersons' Analysis
For the Year Ended December 31
Salesperson	Contribution Margin	Variable Cost of Goods Sold as a Percent of Sales	Variable Selling Expenses as a Percent of Sales	Contribution Margin Ratio
Case	$	%	%	%
Dix		%	%	%
Johnson		%	%	%
LaFave		%	%	%
Orcas		%	%	%
Sussman		%	%	%
Willbond		%	%	%

Feedback

Calculate:

Column 1: Contribution margin = Total sales – (Variable cost of goods sold + Variable selling expenses)

Column 2: Variable cost of goods sold as a percent of sales = Variable cost of goods sold/Total sales

Column 3: Variable selling expenses as a percent of sales = Variable selling expenses/Total sales

Column 4: Contribution margin ratio = Contribution margin/Total sales

2. Which salesperson generated the highest contribution margin ratio for the year?

Feedback

2. The salesperson who generated the highest contribution margin ratio for the year, probably sells a favorable mix of product that has high manufacturing margins as a percent of sales.

3. Identify the factors other than contribution margin that should be considered in evaluating the performance of salespersons.

1. Rate of growth in sales for the current year compared with past years
2. Years of experience for salespersons
3. Size of sales territory
4. Actual sales compared with budgeted sales
5. All of the above

Answer 1

Answer 1:

The above excel workings with 'show formula' is as below:

Answer 2:

The salespersons generated the highest contribution margin ratio for the year are Orcas and Willbond. Both of them have generated 48% contribution margin ratio each.

Answer 3:

Correct answer is:

5. All of the above

Explanation:

Factors other than contribution margin that should be considered in evaluating the performance of salespersons are:

1. Rate of growth in sales for the current year compared with past years
2. Years of experience for salespersons
3. Size of sales territory
4. Actual sales compared with budgeted sales

It is improtant to consider all the above factors along with contribution margin in evaluating the performance of salespersons.