Question

Return to 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: Sales Clain jumper $ 94,000 29, 200 $ 64, Makeover $47.000 6,050 $ 40,950 Variable expenses Contribution margin Fixed expenses Net operating income Total 141.000 35,250 105,750 33,700 22,050 $ 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 is complete but not entirely correct. Complete this question by entering your answers in the tabs below Required Required 2 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. (Do not round intermediate calculations, Round your answers to the nearest dollar amount Engberg Company Contribution income Statement

Answer 1

REQUIRED :

1. CONTRIBUTION MARGIN RATIO :

= Total Contribution / Total sales *100

= $105,750 / $ 141,000 *100

= 75% of overall contribution margin ratio.

2. BREAK EVEN SALES :

= Fixed cost / contribution margin ration

= 83,700 / 75%

= 111,600$ of overall break even sales

3. CONTRIBUTION FORMAT INCOME STATEMENT AT COMPANY'S BREAK EVEN POINT THAT SHOWS APPROPRIATE LEVEL OF SALES OF TWO PRODUCTS :

  Contribution margin ratio = 75% , then Variable cost ratio to sales = 25%

BEP Sales = 111,600$

At BEP profit is always ZERO .

Sales % of Claimjumper = $94,000 / 141,000 *100 = 66.67%

Sales % of Makeover = $ 47,000 / 141,000 *100 = 33.33%

CLAIMJUMPER MAKEOVER TOTAL

SALES 74,400 $ 37,200 $ $ 111,600

( 66.67% of 111,600 ) ( 33.33% of 111,600 ) ( BEP SALES )

VARIABLE COST (25%) 18,600 9,300 27,900

CONTRIBUTION    $ 83,700  

FIXED COST $ 83,700

NET OPERATING INCOME 0