Question

Lucky Products markets two computer games: Predator and Runway. A contribution format income statement for a recent month for the two games appears below:

Predator Runway Total

Sales $114,000 $57,000 $171,000

Variable expenses 42,040 9,260 51,300

Contribution margin $71,960 $47,740 119,700

Fixed expenses 78,750

Net operating income $40,950


Required:

Complete the contribution format income statement at the break-even point for the company showing the appropriate levels of sales for the two products. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.)

Answer 1

Contribution format income statement at the break-even point

Predator Runway Total

Sales $75,000 $37,500 $112,500

Variable expenses $27,660 $6,090 $33,750

Contribution margin $47,340 $31,410 $78,750

Fixed expenses $78,750

Net operating income $0

Step-by-step explanation:

Predator Runway Total

Sales $114,000 $57,000 $171,000

Sales Ratio 66.67% 33.33% 100%

Variable expenses $42,040 $9,260 $51,300

V.C Ratio 36.88% 16.24% 30%

Contribution margin $71,960 $47,740 $119,700

CM Ratio 63.12% 83.76% 70%

Weight. Avg. Cont. 42.08% 27.92% 70%

Fixed expenses 78,750

Break-even (78,750/70%) 112,500

Net operating income $40,950

Weighted Average contribution = (63.12% X 66.67%) + (83.76% X 33.33%)

Weighted Average contribution = 42.08% + 27.92% = 70%

Sales of Predator = 112,500 x 66.67% = $75,000

Sales of Runway = 112,500 x 33.33% = $37,500