Territory and Product Profitability Analysis
Pipeline Surfboards Inc. manufactures and sells two styles of surfboards, Atlantic Wave and Pacific Pounder. These surfboards sold in two regions, East Coast and West Coast. Information about the two surfboards is as follows:
Atlantic Wave
Pacific Pounder
Sales price
$250
$200
Variable cost of goods sold per unit
(93)
(96)
Manufacturing margin per unit
$157
$104
Variable selling expense per unit
(112)
(48)
Contribution margin per unit
$45
$56
The sales unit volume for the sales territories and products for the period is as follows:
East Coast West Coast
Atlantic Wave
3,080
1,540
Pacific Pounder
0
1,540
a. Prepare a contribution margin by sales territory report. Compute the contribution margin ratio for each territory. Round contribution margin ratio answers to two decimal places.
Pipeline Surfboards Inc.
Contribution Margin by Territory
Line Item Description
East Coast
West Coast
Sales
770,000
693,000?
Variable cost of goods sold
286,440
147,840 X
Manufacturing margin
Variable selling expenses
344,960
418,880 X
Contribution margin
Contribution margin ratio