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		$250
Variable cost of goods sold per unit	(111)		(123)
Manufacturing margin per unit	$189		$127
Variable selling expense per unit	(135)		(57)
Contribution margin per unit	$54		$70

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

	East Coast		West Coast
Atlantic Wave	2,820		1,410
Pacific Pounder	0		1,410

a. Prepare a contribution margin by sales territory report. Compute 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
Sales	$	$
Variable cost of goods sold
Manufacturing margin	$	$
Variable selling expenses
Contribution margin	$	$
Contribution margin ratio	%	%

Answer 1

	Contribution margin report
	For East coast
	Particulars	Atlantic wave ($)	Pacific Pounder ($)
A	Sales in units	2,820	-
B	Sale value ($300/unit * A)	8,46,000	-
C	Variable cost of goods sold ($111/unit * A)	3,13,020	-
D	Manufacturing margin (B-C)	5,32,980	-
E	Variable selling expenses/unit (135/unit * A)	3,80,700	-
F	Contribution margin/Unit (D-E)	1,52,280	-
	Contribution margin (%) = (E/B)*100	18.00%	-
	For WEST coast
	Particulars	Atlantic wave ($)	Pacific Pounder ($)
A	Sales in units	1,410	1,410
B	Sale value ($300/unit * A)- Atlantic wave	4,23,000	-
	Sale value ($250/unit * A)- Pacific pounder		3,52,500
C	variable cost of goods sold ($111/unit * A)-Atlantic wave	1,56,510	-
	Variable cost of goods sold ($123/unit * A)-Pacific pounder		1,73,430
D	Manufacturing margin (B-C)	2,66,490	1,79,070
E	Variable selling expenses/unit (135/unit * A)-Atlantic Wave	1,90,350	-
	Variable selling expenses/unit ($57/unit * A)-Pacific pound		80,370
F	Contribution margin/Unit (D-E)	76,140	98,700
	Contribution margin (%) = (E/B)*100	18.00%	28.00%