Question

Territory and Product Profitability Analysis

Coast to Coast Surfboards Inc. manufactures and sells two styles of surfboards, Atlantic Wave and Pacific Pounder. These surfboards are sold in two regions, East Coast and West Coast. Information about the two surfboards is as follows:

	Atlantic Wave		Pacific Pounder
Sales price	$300		$200
Variable cost of goods sold per unit	111		98
Manufacturing margin per unit	$189		$102
Variable selling expense per unit	117		62
Contribution margin per unit	$72		$40

The sales unit volume for the territories and products for the period is as follows:

	East Coast		West Coast
Atlantic Wave	2,880		1,440
Pacific Pounder	0		1,440

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

Coast to Coast Surfboards Inc.
Contribution Margin by Territory
	East Coast	West Coast
	$	$
	$	$
	$	$
Contribution margin ratio	%	%

Answer 1

Contribution margin and contribution margin ratio by sales territory report are as prepared below:

Coast to Coast Surfboards Inc.
Contribution Margin by Territory
	East Coast
Sales (a)	864,000	2,880*300
variable cost of goods sold (b)	319,680	2,880*111
Manufacturing margin (a-b)	544,320
Variable selling expenses (c	336,960	2,880*117
Contribution margin (a-b-c)	207,360
Contribution margin ratio	24.00%
Coast to Coast Surfboards Inc.
Contribution Margin by Territory
	West Coast	Atlantic wave	Pacific Pounder
Sales (a)	720,000	1,440*300	1,440*200
variable cost of goods sold (b)	300,960	1,440*111	1,440*98
Manufacturing margin (a-b)	419,040
Variable selling expenses (c	257,760	1,440*117	1,440*62
Contribution margin (a-b-c)	161,280
Contribution margin ratio	22.40%