Question

Exercise 5-12 Multiproduct Break-Even Analysis (LO5-9) 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 Shot $ 700,000 $300,000 605 785 Total $1,000,000 CM ratio Fixed expenses total $592,000 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 $51,000 a month, by how much would you expect the monthly net operating income to increase? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Pronare a contribution format income statement for the man whole and narrantannewaret Harimaalne

Answer 1

Contribution format Income Statement
	Flight Dynamic		Sure Shot		Total
	Amount	%	Amount	%	Amount	%
Sales	700,000	100.00%	300,000	100.00%	1,000,000	100.00%
Variable Expenses	280,000	40.00%	66,000	22.00%	346,000	34.60%
Contribution Margin	420,000	60.00%	234,000	78.00%	654,000	65.40%
Fixed Expenses					592,000	59.20%
Net Operating Income					62,000	6.20%
Break even point in dollar sales = Fixed costs/Contribution margin ratio
905,198.78
i.e.	$905,199
3.Monthly net operating income will increase by the amount of contribution margin as fixed costs will not change
Change in operating income = 51000*65.40% = $33,354