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 $102,000 25,480 $ 76,520 Makeover $ 51,000 5,120 $ 45,880 Total $ 153,000 30,600 122,400 92,400 $ 30,000 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.

$Contribution Margin \%= \frac{Contribution}{Sales} X 100$

$Contribution Margin \%= \frac{\$122,400}{\$153,000} X 100$

2.

$Break even point = \frac{Fixed cost}{Contribution Margin}$

$Break even point = \frac{\$92,400}{80\%}$

c.

Lucido Products Contribution Income Statement Claimjumper Makeover Total Sales $77,000 $38,500 $115,500 Less: Variable Cost ($19,235) ($3,865) ($23,100) Contribution Margin $57,765 $34,635 $92,400 Less: Fixed Cost ($92,400) Net Operating Income (loss) $0

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