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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:

Line Item Description	Conquistador	Hurricane
Sales price	$6,000	$11,500
Variable cost of goods sold	(3,600)	(5,750)
Manufacturing margin	$2,400	$5,750
Variable selling expenses	(900)	(1,150)
Contribution margin	$1,500	$4,600
Fixed expenses	(750)	(1,000)
Operating income	$750	$3,600

In addition, the following sales unit volume information for the period is as follows:

Line Item Description	Conquistador	Hurricane
Sales unit volume	10,000	4,000

Question Content Area

a. Prepare a contribution margin by product report. Compute the contribution margin ratio for each product as a whole percent.

Galaxy Sports Inc. Contribution Margin by Product blank

Line Item Description	Conquistador	Hurricane
Contribution marginCost of goods soldDirect laborGross profitSales	$- Select -	$- Select -
Fixed cost of goods soldFixed selling expensesManufacturing marginSalesVariable cost of goods sold	- Select -	- Select -
Contribution marginCost of goods soldFixed manufacturing costsGross profitManufacturing margin	$- Select -	$- Select -
Fixed cost of goods soldFixed selling expensesManufacturing marginSalesVariable selling expenses	- Select -	- Select -
Contribution marginCost of goods manufacturedFixed manufacturing costsFixed salesManufacturing margin	$- Select -	$- Select -
Contribution margin ratioFixed manufacturing costsFixed salesManufacturing marginVariable cost of goods sold	- Select -%	- Select -%

Question Content Area

b. What advice would you give to the management of Galaxy Sports Inc. regarding the profitability of the two products? The fill in the blank 1 of 2

ConquistadorHurricane

line provides the largest total contribution margin and the largest contribution margin ratio. If the sales mix were shifted more toward the fill in the blank 2 of 2

ConquistadorHurricane

line, the overall profitability of the company would increase.

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