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: Clai jumper Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 116,000 42,760 $ 73,240 Makeover $ 58,000 9,440 $ 48,560 Total $ 174,000 52,200 121,800 82, 110 $ 39,690 Required: 1. What is the overall contribution margin (CM) ratio for the company? 2. What is the company's overall break-even point in dollar sales? 3. Prepare a contribution format income statement at the company's break-even point that shows the appropriate levels of sales for the two products. Complete this question by entering your answers in the tabs below Required 1 Required 2 Required 3 What is the overall contribution margin (CM) ratio for the company? Overall CM ratio < Required 1 Required 2 >

Answer 1

Required 1 :
Overall CM ratio = 70 %
Explanation :
Overall Contribution margin (CM) ratio = Total contribution margin / Total Sales
Overall Contribution margin (CM) ratio = $ 121,800 / $ 174,000
Overall Contribution margin (CM) ratio = 70 %
Required 2 :
Overall break -even point = $ 117,300
Explanation :
Overall break -even point = Total Fixed expenses / Overall CM ratio
Overall break -even point = $ 82,110 / 70 %
Overall break -even point = $ 117,300

Required 3 :
Engberg Company
Contribution Income statement
	Claimjumper	Makeover	Total
Sales at break even (Note 1)	$ 78,204	$ 39,096	$ 117,300
Less: Variable expense at break even(Note 2)	($28,827)	($6,363)	($35,190)
Contribution Margin	$ 49,377	$ 32,733	$ 82,110
less: Fixed expenses (Given)			($82,110)
Net operating income (loss)			$ 0

At company's break even point , there is No profit or No loss

Note 1:
	Claimjumper	Makeover	Total
Sales (Given)	$ 116,000	$ 58,000	$ 174,000
Percent of total	66.67 % {116,000/174,000}	33.33 % {58,000/174,000}	100 % {174,000/174,000}
Sales at break even	$ 78,204 {117,300*66.67%}	$ 39,096 {117,300*33.33%}	$ 117,300
Note 2:
	Claimjumper	Makeover	Total
Sales (Given)	$ 116,000	$ 58,000	$ 174,000
Variable expense(Given)	$ 42,760	$ 9,440	$ 52,200
Sales at break even (see note1)	$ 78,204 {117,300*66.67%}	$ 39,096 {117,300*33.33%}	$ 117,300
Variable expense at break even	$ 28,827 {(78,204/116,000)*42,760}	$ 6,363 {(39,096/58,000)*9,440}	$ 35,190 {(117,300/174,000)*52,200}