Question

Exercise 5-10 Multiproduct Break-Even Analysis (LO5-9] 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 $ 112,000 27,880 $ 84,120 Makeover $ 56,000 5,720 $ 50,280 Total $ 168,000 33,600 134,400 88,560 $ 45,840 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

Requirement: 1 Overall Contribution margin Ratio = (contribution margin / sales)*100 Contriubtion margin Total sales Overall Contribution margin Ratio 134400 168000 80% Requirement: 2 Overall Break-even point in dollars = Fixed expenses / Contribution margin ratio Fixed cost Contribution margin ratio Overall Break even point in dollars 88560 80% 110700 Requirement: 3 Lucido Products Contribution Income Statement Claim jumper 73800 18371 55429 Break even sales Less: Variable Expenses Contribution margin Less: Fixed expenses Net operating income Make over 3 6900 3769 3 3131 Total 110700 22140 88560 88560