A.
Variable Costing
Managers frequently use variable costing for internal purposes for taking decision making. The cost of goods manufactured includes direct materials, direct labor, and variable factory overhead. Fixed factory overhead treated as period (fixed) expense.
Contribution Margin
Contribution margin is the excess of manufacturing margin above selling and administrative expenses. Contribution margin is calculated by deducting the variable cost from sales or deducting variable selling and administrative expenses from manufacturing margin.
To calculate: The contribution margin ratio for each territory.
B.
To State: The advice regarding the relative profitability of two territories.
Want to see the full answer?
Check out a sample textbook solutionChapter 6 Solutions
Bundle: Managerial Accounting, Loose-leaf Version, 14th - Book Only
- Island Novelties, Inc., of Palau makes two products, Hawaiian Fantasy and Tahitian Joy. Present revenue,cost, and sales data for the two products follow:Hawaiian TahitianFantasy JoySelling price per unit .................................. $15 $100Variable expenses per unit ........................ $9 $20Number of units sold annually ................... 20,000 5,000Fixed expenses total $475,800 per year. The Republic of Palau uses the U.S. dollar as its currency.Required:1. Assuming the sales mix given above, do the following:a. Prepare a contribution format income statement showing both dollar and percent columns for eachproduct and for the company as a whole.b. Compute the break-even point in dollars for the company as a whole and the margin of safety inboth dollars and percent.2. The company has developed a new product to be called Samoan Delight. Assume that the companycould sell 10,000 units at $45 each. The variable expenses would be $36 each. The company’s fixedexpenses would not…arrow_forwardTerritory 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 $350 $300 Variable cost of goods sold per unit (130) (147) Manufacturing margin per unit $220 $153 Variable selling expense per unit (150) (75) Contribution margin per unit $70 $78 The sales unit volume for the territories and products for the period is as follows: East Coast West Coast Atlantic Wave 2,660 1,330 Pacific Pounder 0 1,330 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.arrow_forwardTerritory 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 $350 $250 Variable cost of goods sold per unit (130) (115) Manufacturing margin per unit $220 $135 Variable selling expense per unit (157) (70) Contribution margin per unit $63 $65 The sales unit volume for the territories and products for the period is as follows: East Coast West coast Atlantic Wave 2,780 1,390 Pacific Pounder 0 1390arrow_forward
- 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 $400 $300 Variable cost of goods sold per unit (148) (147) Manufacturing margin per unit $252 $153 Variable selling expense per unit (180) (75) Contribution margin per unit $72 $78 The sales unit volume for the territories and products for the period is as follows: East Coast West Coast Atlantic Wave 2,840 1,420 Pacific Pounder 0 1,420 Question Content Area 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…arrow_forwardTerritory and Product Profitability Analysis Pipeline 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: Line Item Description Atlantic Wave Pacific Pounder Sales price $400 $350 Variable cost of goods sold per unit (148) (165) Manufacturing margin per unit $252 $185 Variable selling expense per unit (180) (101) Contribution margin per unit $72 $84 The sales unit volume for the sales territories and products for the period is as follows: Product East Coast West Coast Atlantic Wave 2,460 1,230 Pacific Pounder 0 1,230 Question Content Area 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.arrow_forwardTerritory 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 $350 $300 Variable cost of goods sold per unit (130) (147) Manufacturing margin per unit $220 $153 Variable selling expense per unit (143) (69) Contribution margin per unit $77 $84 The sales unit volume for the territories and products for the period is as follows: East Coast West Coast Atlantic Wave 3,200 1,600 Pacific Pounder 0 1,600 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 Territoryarrow_forward
- 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 $350 $250 Variable cost of goods sold per unit (130) (118) Manufacturing margin per unit $220 $132 Variable selling expense per unit (157) (67) Contribution margin per unit $63 $65 The sales unit volume for the territories and products for the period is as follows: East Coast West Coast Atlantic Wave 2,460 1,230 Pacific Pounder 0 1,230 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…arrow_forwardTerritory 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 $350 $300 (130) (138) $162 Sales price Variable cost of goods sold per unit Manufacturing margin per unit Variable selling expense per unit Contribution margin per unit The sales unit volume for the territories and products for the period is as follows: East Coast West Coast 2,960 Atlantic Wave Pacific Pounder 0 1,480 1,480 Coast to Coast Surfboards Inc. Contribution Margin by Territory Sales Variable cost of goods sold Manufacturing margin Variable selling expenses Contribution margin Contribution margin ratio 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…arrow_forwardTerritory and Product Profitability Analysis Pipeline 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 $250 $200 Variable cost of goods sold per unit (93) (92) Manufacturing margin per unit $157 $108 Variable selling expense per unit (112) (52) Contribution margin per unit $45 $56 The sales unit volume for the sales territories and products for the period is as follows: Atlantic Wave Pacific Pounder East Coast West Coast 2,860 0 1,430 1,430 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 Sales ▾✔ Variable cost of goods sold Manufacturing margin Variable selling…arrow_forward
- Territory and Product Profitability Analysis Pipeline 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 Variable cost of goods sold per unit Manufacturing margin per unit Variable selling expense per unit Contribution margin per unit $250 $200 (93) (92) $157 $108 (112) $45 (52) $56 The sales unit volume for the sales territories and products for the period is as follows: East Coast West Coast Atlantic Wave Pacific Pounder 2,860 0 1,430 1,430 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 Sales East Coast West Coast 715,000 Variable cost of goods sold Manufacturing…arrow_forwarderritory 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 $400 $350 Variable cost of goods sold per unit (148) (161) Manufacturing margin per unit $252 $189 Variable selling expense per unit (156) (91) Contribution margin per unit $96 $98 The sales unit volume for the territories and products for the period is as follows: East Coast West Coast Atlantic Wave 3,260 1,630 Pacific Pounder 0 1,630 Question Content Area 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…arrow_forwardTerritory and Product Profitability Analysis Pipeline 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 Variable cost of goods sold per unit Manufacturing margin per unit Variable selling expense per unit Contribution margin per unit The sales unit volume for the sales territories and products for the period is as follows: East Coast West Coast 2,960 Line Item Description Sales Variable cost of goods sold Manufacturing margin Variable selling expenses Contribution margin 0 Pipeline Surfboards Inc. Contribution Margin by Territory Contribution margin ratio 1,480 1,480 Atlantic Wave 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. $ $300 (111) $189…arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College Pub