Galaxy Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Conquistador and Hurricane, from a single manufacturing facility. The manufacturing facility operates at 100% of capacity. The following per-unit information is available for the two products:
Conquistador Hurricane
Sales price $6,000 $11,500
Variable cost of goods sold (3600) (5750)
Manufacturing margin $2400 $5750
Variable selling expenses (900) (1150)
Contribution margin $1500 $4600
Fixed (750) (1000)
Operating income $750 $3600
In addition, the following sales unit volume information for the period is as follows:
Conquistador Hurricane
Sales unit volume 10,000 4,000
Requried:
a. Prepare a contribution margin by product report. Compute the contribution margin ratio for each.
b. What advice would you give to the management of Galaxy Sports Inc. regarding the profitability of the two products?
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Galaxy Sports Inc. manufactures and sells two styles of All Terrain Vehicles (ATVs), the Conquistado...
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