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: Percentage of total sales Sales Variable expenses Contribution margin Fixed expenses Net operating income White 48 % $ 336,000 100,800 $ 235, 200 Product Fragrant Loonzain 20 % 323 100 $ $ 140,000 100 % $ 224,000 100 % 30 112,000 80% 123,200 55 % 70 % $ 28,000 20 % $ 100, 800 45 % Total 100 % $ 700,000 336,000 364,000 232,440 $ 131,560 100 % 48 % 52 % Dollar sales to break-even Fixed expenses CM ratio $ 232,440 0.52 = $447,000 As shown by these data, net operating income is budgeted at $131,560 for the month and the estimated break-even sales is $447,000. Assume that actual sales for the month total $700,000 as planned; however, 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

Required 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							232440
Net operating income							68560

Required 2 :
Break-even point in dollar sales = Total Fixed expense / Contribution margin ratio of company = 232440 / 43% =	540558