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	$	106,000			$	53,000		$	159,000
Variable expenses		26,440				5,360			31,800
Contribution margin	$	79,560			$	47,640			127,200
Fixed expenses									92,640
Net operating income								$	34,560

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.

Answer 1

1. Overall Contribution Margin of the Company = Total Contribution Margin / total Sales = 127200/159000 80% 2. Overall Break Even poin in dollar Sales = Fixed Cost / CM Ratio = 92640/80% 115800 Contribution Margin income Statement at the Companies Break Even point ClaimJumpers Make over Totals Sales 77200 38600 115800 1925613904 Varaibles Expense 23160 contribution Margin 57944 34696 92640 Fixed Expense 92640 Net operating Margin Sales MixRatio=Division Sales / Total sales Variable Cost ratio Sales = Total Sales* Sales mix Ratio Variable cost = sales *VC Ratio ClaimJumpers Make over 0.6666666671 0.33333333 0.249433962 0.10113208 77200 38600 19256.30189 3903.69811