Question

Exercise 3-10 Compute the Break-Even Point for a Multiproduct Company (LO3-9] Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for a recent month for the two games appears below: $ $ Sales Variable expenses Contribution margin Fixed expenses Net operating income Claimjumper $ 118,000 29,320 $ 88,680 Makeover 59.000 6,080 52.920 Total 177.000 35.400 141,600 90,960 $ $ 50,640 Required: 1. Compute the overall contribution margin (CM) ratio for the company. Overall CM ratio 2. Compute the overall break-even point for the company in dollar sales. (Do not round intermediate calculations. Round your answer to the nearest dollar amount.) Overall break-even point 3. Complete the contribution format income statement at break-even point for the company showing the appropriate levels of sales for the two products. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.) Lucido Products Contribution Income Statement Claimjumper Makeover Total S 0S 0

Answer 1

1) Overall CM ratio = Contribution margin/sale
overall CM ratio = 141600/177000 = 0.8
overall CM ratio = 80%
2) Overall break even = total fixed exp/overall CM ratio
overall break even = 90960/0.80 = 113700
3)
Lucido Products
Contribution Income Statement
		Claimjumper	Makeover	Total
Sales		75800	37900	113700
less: variable expenses		18834	3906	22740
Contribution margin		56966	33994	90960
less: Fixed expenses				90960
net operating income				0
Calculation of variable expenses
		Claimjumper	Makeover	Total
sales		118000	59000	177000
% of total sale		66.67%	33.33%	100%
sale at break even		75800	37900	113700
variable expenses
Claimjumper = 29320*(75800/118000) = 18834.37 (rounded off 18834)
makeover =6080*(37900/59000) = 3905.627 (rounded off 3906)

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