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:

	Claimjumper				Makeover			Total
Sales	$	110,000			$	55,000		$	165,000
Variable expenses		27,400				5,600			33,000
Contribution margin	$	82,600			$	49,400			132,000
Fixed expenses									93,360
Net operating income								$	38,640

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

1
Total contribution margin	132000
Divide by Total sales	165000
Overall Contribution margin (CM) ratio	80%
2
Fixed expenses	93360
Contribution margin (CM) ratio	80%
Overall break-even point	116700
3
Lucido Products
Contribution Income Statement
	Claimjumper	Makeover	Total
Sales	77800	38900	116700
Variable expenses	19379	3961	23340
Contribution margin	58421	34939	93360
Fixed expenses			93360
Net operating income			0
Workings:
Sales mix:
Claimjumper = 110000/165000 = 2/3
Makeover = 55000/165000 = 1/3
Sales at break even:
Claimjumper = 116700*2/3= 77800
Makeover = 116700*1/3= 38900
Variable expenses at break even:
Claimjumper = 27400/110000*77800 = 19379
Makeover = 5600/55000*38900 = 3961