Sales Territory and Salesperson Profitability Analysis Havasu Off-Road Inc. manufactures and sells a variety of commercial vehicles

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Sales Territory and Salesperson Profitability Analysis

Havasu Off-Road Inc. manufactures and sells a variety of commercial vehicles in the Northeast and Southwest regions. There are two salespersons assigned to each territory. Higher commission rates go to the most experienced salespersons. The following sales statistics are available for each salesperson:

	Northeast		Southwest
	Rene	Steve	Colleen	Paul
Average per unit:
Sales price	$12,400	$15,200	$9,600	$18,100
Variable cost of goods sold	$7,440	$9,120	$6,144	$7,240
Commission rate	8%	12%	11%	9%
Units sold	33	24	36	42
Manufacturing margin ratio	40%	40%	36%	60%

a. 1. Prepare a contribution margin by salesperson report. Calculate the contribution margin ratio for each salesperson. If required, round contribution margin ratio to one decimal place.

Havasu Off-Road Inc.
Contribution Margin by Salesperson

	Rene	Steve	Colleen	Paul
	$	$	$	$

	$	$	$	$

	$	$	$	$
Contribution margin ratio	%	%	%	%

a. 2. Interpret the report.

Paul earns the contribution margin and has the contribution margin ratio. This is because he sells the units, has a commission rate, and sells a product mix with a manufacturing margin. Steve also sells products with a average manufacturing margin but at a commission rate. Colleen has the contribution margin ratio among the four salespersons. Although Rene has a high variable cost of goods sold and also sells products with a average sales price per unit, she has the second total contribution margin.

b. 1. Prepare a contribution margin by territory report. Calculate the contribution margin for each territory as a percent, rounded to one decimal place.