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:

	Claimjumper				Makeover			Total
Sales	$	102,000			$	51,000		$	153,000
Variable expenses		31,600				6,650			38,250
Contribution margin	$	70,400			$	44,350			114,750
Fixed expenses									86,400
Net operating income								$	28,350

Required:

Prepare a contribution format income statement at the company's break-even point that shows the appropriate levels of sales for the two products.

Answer 1

Weighted Contribution Margin Ratio = Contribution Margin / Sales x 100
= $114750/153000 = 75%

Break even sales = Fixed Expenses / Weighted Contribution Margin Ratio
= $86400 / 75% = $115200

	Claimjumper	Makeover	Total
Sales	$              76,800	$              38,400	$             1,15,200
Variable Expenses	$              23,793	$                 5,007	$                28,800
Contribution Margin	$              53,007	$              33,393	$                86,400
Fixed Expenses			$                86,400
Net Operating Income			$                         -