Question

Sales Territory and Salesperson Profitability Analysis

Havasu Off-Road Inc. manufactures and sells a variety of commercial vehicles in the Northeast and Southwest regions. There are two salespersons assigned to each territory. Higher commission rates go to the most experienced salespersons. The following sales statistics are available for each salesperson:

	Northeast				Southwest
	Rene		Steve		Colleen		Paul
Average per unit:
Sales price	$15,500		$16,000		$14,000		$18,000
Variable cost of goods sold	$9,300		$8,000		$8,400		$9,000
Commission rate	8%		12%		10%		8%
Units sold	36		24		40		60
Manufacturing margin ratio	40%		50%		40%		50%

a. 1. Prepare a contribution margin by salesperson report. Compute the contribution margin ratio for each salesperson.

Havasu Off-Road Inc.
Contribution Margin by Salesperson
	Rene	Steve	Colleen	Paul
Sales	$	$	$	$
Variable cost of goods sold
Manufacturing margin	$	$	$	$
Variable commission expense
Contribution margin	$	$	$	$
Contribution margin ratio	%	%	%	%

. 1. Prepare a contribution margin by territory report. Compute the contribution margin for each territory as a percent, rounded to one decimal place.

Havasu Off-Road Inc.
Contribution Margin by Territory
	Northeast	Southwest
Sales	$	$
Variable cost of goods sold
Manufacturing margin	$	$
Variable commission expense
Contribution margin	$	$
Contribution margin ratio	%	%

The Southwest Region has $_____???____ more sales and $____???_____ more contribution margin. In the Southwest Region, the salesperson with the highest sales unit volume, has the highest  contribution margin ratio. The Southwest Region has the highest  performance, even though it also has the salesperson with the lowest  contribution margin ratio. The Northeast Region contribution margin is less  than the Southwest Region because of the outstanding performance of Paul .

Answer 1

Answer :

a(1)

Havasu Off-Road Inc.
Contribution Margin by Salesperson
	Rene	Steve	Colleen	Paul
Sales	$ 558000	$ 384000	$ 560000	$ 1080000
Variable cost of goods sold	$ 334800	$ 192000	$ 336000	$ 540000
Manufacturing Margin	$ 223200	$ 192000	$ 224000	$ 540000
Variable commision expenses	$ 44640	$ 46080	$ 56000	$ 86400
Contribution Margin	$ 178560	$ 145920	$ 168000	$ 453600
Contribution margin ratio	32%	38 %	30%	42 %

(1)

Havasu Off-Road Inc.
Contribution Margin by  Territory
	Northeast	Southwest
Sales	$ 942000	$ 1640000
Variable cost of goods sold	$ 526800	$ 876000
Manufacturing Margin	$ 415200	$ 764000
Variable commision expenses	$ 90720	$ 142400
Contribution Margin	$ 324480	$ 621600
Contribution margin ratio	34.4 %	37.9 %

The Southwest Region has $ 698000  more sales and $ 297120  more contribution margin. In the Southwest Region, the salesperson with the highest sales unit volume, has the highest  contribution margin ratio. The Southwest Region has the highest  performance, even though it also has the salesperson with the lowest  contribution margin ratio. The Northeast Region contribution margin is less  than the Southwest Region because of the outstanding performance of Paul .