Question

Olongapo Sports Corporation distributes two premium golf balls—the Flight Dynamic and the Sure Shot. Monthly sales and the contribution margin ratios for the two products follow: Product Flight Dynamic Sure Shot Total Sales $150,000 $250,000 $400,000 CM ratio 80% 36% ? Fixed expenses total $183,750 per month. Prepare a contribution format income statement for the company as a whole.

Answer 1

A contribution format income statement for Olongapo Sports Corporation was prepared by calculating the contribution margin for both golf ball products, summing them up, and subtracting fixed expenses to find the net operating income, which is $26,250.

Step-by-step explanation:

To prepare a contribution format income statement for Olongapo Sports Corporation, which distributes two premium golf balls—Flight Dynamic and Sure Shot, we need to calculate the total contribution margin (CM) for each product and then for the company as a whole before deducing the fixed expenses to find the net operating income.

Flight Dynamic sales are $150,000 with a CM ratio of 80%, giving a CM of $120,000 ($150,000 * 80%). Sure Shot sales are $250,000 with a CM ratio of 36%, giving a CM of $90,000 ($250,000 * 36%). The total CM is $210,000 ($120,000 + $90,000). After subtracting the fixed expenses of $183,750, the net operating income is $26,250 ($210,000 - $183,750).

Income Statement:
Total Sales: $400,000
Total Contribution Margin: $210,000
Fixed Expenses: $183,750
Net Operating Income: $26,250