Question

Product White Fragrant Loonzain Total Percentage of total sales 48 % 20 % 32 % 100 % Sales $ 312,000 100 % $ 130,000 100 % $ 208,000 100 % $ 650,000 100 % Variable expenses 93,600 30 % 104,000 80 % 114,400 55 % 312,000 48 % Contribution margin $ 218,400 70 % $ 26,000 20 % $ 93,600 45 % 338,000 52 % Fixed expenses 233,480 Net operating income $ 104,520 Dollar sales to break-even = Fixed expenses = $233,480 = $449,000 CM ratio 0.52 As shown by these data, net operating income is budgeted at $104,520 for the month and the estimated break-even sales is $449,000. Assume that actual sales for the month total $650,000 as planned. Actual sales by product are: White, $208,000; Fragrant, $260,000; and Loonzain, $182,000. Required: 1. Prepare a contribution format income statement for the month based on the actual sales data. 2. Compute the break-even point in dollar sales for the month based on your actual data.

Answer 1

1) contribution format income statement

Product

White Fragrant Loonzain Total

Actual sales $208,000 $260,000 $182,000 $650,000

Variable exp. $62,400 (0.3) $208,000 (0.8) $100,100 (.55) $370,500

Con. margin $145,600 (0.7) $51,200 (0.2) $81,900 (.45) $278,700

Fixed expenses $233,480

Operating income $45,220

2) break even point in dollar sales = fixed expenses / CM ratio = $233,480 / ($278,700 / $650,000) = $544,535.34