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 34,000 7,250 41,250 Contribution margin $ 76,000 $ 47,750 123,750 Fixed expenses 86,400 Net operating income $ 37,350 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. Overall Contribution Margin of the Company = Total Contribution Margin / total Sales = 123750/165000 75% 2. Overall Break Even poin in dollar Sales = Fixed Cost / CM Ratio = 86400/75% 115200 Contribution Margin income Statement at the Companies Break Even point ClaimJumpers Make over Totals Sales 76800 38400 115200 Varaibles Expense 23738 5062 28800 contribution Margin 53062 33338 864001 Fixed Expense 86400 Net operating Margin Sales MixRatio=Division Sales / Total sales Variable Cost ratio Sales = Total Sales* Sales mix Ratio Variable cost = sales *VC Ratio ClaimJumpers Make over 0.666666667 0.33333333 0.309090909 0.13181818 76800 38400 23738.18182 5061.81818