Question

Gold Star Rice, Ltd., of Thailand exports Thai rice throughout Asia. The company grows three varieties of rice-White, Fragrant, and Loonzain. Budgeted sales by product and in total for the coming month are shown below Product White 48 % Fragrant 20% Loonzain 32 % Total 100 % Percentage of total sales Sales Variable expenses Contribution margin Fixed expenses $336,000 100% $140,000 100% $224,000 100% $700,000 100% 48 % 39% 78% $ 28,000 80% 20% $ 100,800 55 % 45 % 336,000 364,000 233,48o $ 130,520 100,800 $ 235,200 112,000 123,200 52 % Net operating income Fixed expenses CM ratio 233,480 0.52 Dollar sales to break-even - $449,000 As shown by these data, net operating income is budgeted at $130,520 for the month and the estimated break-even sales is $449.000 Assume that actual sales for the month total $700,000 as planned. Actual sales by product are: White, $224,000; Fragrant, $280,000; and Loonzain, $196,000. Required 1. Prepare a contribution format income statement for the month based on the actual sales data 2. Compute the break-even point in dollar sales for the month based on your actual data

Answer 1

1.

Gold Star Rice, Ltd.
Contribution Income Statement
	Product
	White			Fragrant			Loonzain			Total
Percentage of total sales	32	%		40	%		28	%		100	%
Sales	224000	100	%	280000	100	%	196000	100	%	700000	100	%
Variable expenses	67200	30	%	224000	80	%	107800	55	%	399000	57	%
Contribution margin	156800	70	%	56000	20	%	88200	45	%	301000	43	%
Fixed expenses										233480
Net operating income										67520

2. Break-even point in dollar sales = Fixed expenses/Contribution margin ratio = $233480/0.43 = $542976.74

Note: Kindly round off the break-even point in dollar sales per instructions in requirement 2, if any, since the same has not been given with the question.