Question

Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for a recent month for the two games appears below:

Claim Jumper Makeover Total
Sales $ 30,000 $ 70,000 $ 100,000
Variable expenses 20,000 50,000 70,000
Contribution margin $ 10,000 $ 20,000 30,000
Fixed expenses 24,000
Net operating income $ 6,000
Required:
1. What is the overall contribution margin (CM) ratio for the company? (Round your answer to the nearest whole percent. Omit the "%" sign in your response.)
2. Compute the overall break-even point for the company in sales dollars. (Omit the "$" sign in your response.)

Answer 1

A.

Contribution Margin = contribution divided by Sales x 100%

Contribution margin % of Lucidio products = $30,000 / $100,000 = 33%

33.

B.

Break even point is the sales level at which the business covers its cost and returns a zero margin of profit.

Break even point = fixed costs divided by contribution margin

= $24,000/ 33%

= $72,727

72,727