Margin Analysis
Please read the following scenario and answer the questions below. Please explain your reasoning.
Westerman Equipment Inc. manufactures and sells kitchen cooking products throughout the state. The company employs two salespersons. The following contribution margin by salesperson analysis was prepared:
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Westerman Equipment Inc.
Contribution Margin Analysis by Salesperson
Beatty
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Canace
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Sales
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$150,000
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$170,000
|
|
Variable cost of goods sold
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48,000
|
81,600
|
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Manufacturing margin
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$102,000
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$ 88,400
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Variable selling expenses
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|
|
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Commissions
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$ 7,500
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$ 8,500
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Promotion expenses
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46,500
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45,900
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Total variable selling expenses
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$ 54,000
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$ 54,400
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Contribution margin
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$ 48,000
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$ 34,000
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1. Calculate the manufacturing margin as a percent of sales and the contribution margin ratio for each salesperson.
2. Interpret the report and provide recommendations to the two salespersons for improving profitability. Explain the results of your analysis.