Textbook Problem

Territory and product profitability analysis

Coast to Coast Surfboards Inc. manufactures and sells two styles of surfboards. Atlantic Wave and Pacific Founder. These surfboards are sold in two regions. Hast Coast and West Coast.

Information about the two surfboards is as follows:

	Atlantic Wave	Pacific Pounder
Sales price....................................	$200	$120
Variable cost of goods sold per unit........	150	90
Manufacturing margin per unit............	$ 50	$ 30
Variable selling expense per unit...........	34	16
Contribution margin per unit...............	$ 16	$ 14

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

	East Coast	West Coast
Atlantic Wave	40,000	25,000
Pacific Pounder	0	25,000

1. A. Prepare a contribution margin by sales territory report. Calculate the contribution margin ratio for each territory as a whole percent, rounded to two decimal places.
2. B. What advice would you give to the management of Coast to Coast Surfboards regarding the relative profitability of the two territories?