Question

Olongapo Sports Corporation distributes two premium golf balls—Flight Dynamic and Sure Shot. Monthly sales and the contribution margin ratios for the two products follow: Product Flight Dynamic Sure Shot Total Sales $ 650,000 $ 350,000 $ 1,000,000 CM ratio 68 % 76 % ? Fixed expenses total $575,500 per month. Required: 1. Prepare a contribution format income statement for the company as a whole. 2. What is the company's break-even point in dollar sales based on the current sales mix? 3. If sales increase by $44,000 a month, by how much would you expect the monthly net operating income to increase?

Answer 1

Answer:

1
Particulars	Olongapo Sports Corporation
	Flight Dynamic		Sure Spot		Total Company
	Amount	%	Amount	%	Amount	%
Sales	6,50,000	100%	3,50,000	100%	10,00,000	100%
Less:
Variable Cost	2,08,000	32%	84,000	24%	2,92,000	29.20%
Contribution	4,42,000	68%	2,66,000	76%	7,08,000	70.80%
Less:
Fixed Cost					5,75,500	57.55%
Net Income					1,32,500	13.25%
2
Break Even point in $=Fixed cost/Compoany CM Ratio= $575,500/70.80%=$8,12,853.10
3
Total Sales=$1,000,000+$44,000=$10,44,000
Contribution=$1,044,000*70.80%=$7,39,152
Net Operating income=$7,39,152-$575,500=$163,652
Net Operating Income increased by=$163,652-$132,500=$31,152