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: Sales Variable expenses Contribution margin Fixed expenses Net operating income Claimjumper $ 100,000 37,000 $ 63,000 Makeover $ 50,000 8,000 $ 42,000 Total $ 150,000 45,000 105,000 78,960 $ 26,040 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

Contribution Margin ratio for the company =($105,000 / $150,000)*100 =70%
Break-even point for the company =$78,960 / 70% =$112,800
To construct the contribution income statement, we have to determine the sales mix for the 2 products
		Claimjumper	Makeover	Total
Original Dollar sales		$               100,000	$                  50,000	$         150,000
Percent of Total sales		66.67% or 2/3rd	33.33% or 1/3rd
Sales at Break even(as computed)		$                 75,200	$                  37,600	$         112,800
($112,800*2/3, $112,800*1/3)
Lucido Company
Contribution Income Statement
		Claimjumper	Makeover	Total
Sales at Break-even point		$                 75,200	$                  37,600	$         112,800
Less:Variable expenses(allocated proportainetly)		$                 27,824	$                    6,016	$           33,840
Contribution Margin		$                 47,376	$                  31,584	$           78,960
Less:Fixed cost				$           78,960
Net Income				$                  -