60.1K

Verified Solution

Link Copied!

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:

1		Atlantic Wave	Pacific Pounder
2	Sales price	$302.00	$144.00
3	Variable cost of goods sold per unit	113.00	54.00
4	Manufacturing margin per unit	$189.00	$90.00
5	Variable selling expense per unit	162.00	72.00
6	Contribution margin per unit	$27.00	$18.00

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

	East Coast	West Coast
Atlantic Wave	30,000	10,000
Pacific Pounder	0	10,000

a.	Prepare a contribution margin by sales territory report. Calculate the contribution margin ratio for each territory as a whole percent, rounded to one decimal place. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.
b.	What advice would you give to the management of Coast to Coast Surfboards regarding the relative profitability of the two territories?

Amount Descriptions

Amount Descriptions
Contribution margin
Contribution margin ratio
Fixed expenses
Manufacturing margin
Planned contribution margin
Sales
Sales mix
Variable cost of goods sold
Variable selling expenses

Contribution Margin Report

a. Prepare a contribution margin by sales territory report. Calculate the contribution margin ratio for each territory as a whole percent, rounded to one decimal place. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.

Coast to Coast Surfboards Inc.

Contribution Margin by Territory

1		East Coast	West Coast
2
3
4
5
6
7

Final Question

b. What advice would you give to the management of Coast to Coast Surfboards regarding the relative profitability of the two territories?

The East Coasts total contribution margin is and the contribution margin ratio is when compared to the West Coast. This, in part, is explained by the single board style for the East Coast as compared to the two styles available in the West Coast. Taking a closer look, the Atlantic Waves manufacturing margin/unit is while the Pacific Pounders is /unit. And the Atlantic Waves variable selling expense/unit is while the Pacific Pounders is /unit.

With an eye on improving profitability, modifying the product mix within the two territories would be . Additionally, the company should review . The could shed light on manufacturing inefficiencies. Also, a review of variable selling expense per unit could also help with overall profitability.

Answer & Explanation Solved by verified expert

See Answer