Question

Olongapo Sports Corporation distributes two premium golf balls-Flight Dynamic and Sure Shot. Monthly sales and the contribution margin ratios for the two products follow: Product Flight Sure Dynamic Shot $ 720,000 $ 280,000 61% 77% Sales CM ratio Total $ 1,000,000 ? Fixed expenses total $571,500 per month Required: 1. Prepare a contribution format income statement for the company as a whole 2. What is the company's break-even point in dollar sales based on the current sales mix? 3. If sales increase by $48,000 a month, by how much would you expect the monthly net operating income to Increase? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3

Answer 1

Solo Particulars Sales CM Ratio flight. Dynamic $720,000 Sure shot Total $ 280,000 $1000,000 77% 2 61% z> calculation of Contribution Margin e flight Dynamics $720,000 X $ 439,200 Sale's X Х CM Ratio 6.1% Sure shot Sales x CM Ratio $ 280,000 X 77% $215, Goo Total Contribution Margin a = Contribution Margin of flight Dynamic + Sure shot $ 439200 + $ 215,600 $ 654,800 cm Ratio (Total) = Total Contribution Margin Total Sales $ 654,800 $1000,000 0.6548 OR 65.48

Solice Preparation of Contribution format in come Statement as a whole- for the Company Flight Sure Particular Dynamic % Shot % Total 1. Sale's $720,000 100% $280,000 100% $1000,000 100% less; variable Cost's $280,800 397 $ 64,400 231, $ 345,200 34.52). Contribution Margin $439,200 61% $215,600 774 $ 654,800 65.48 less: fixed Exbenses $571,5001 Net Obercuting Income $ 83,300 Net operating Income - $ 83,300

Sol (2) Computation of the break-even point for Com pany based on the current Sales mix- the com Break-even point fixed Cost Total CM Ratio $571500 65.48% $872785.58 OR $ 872786 Break - Even point = $872786

Sol.63 2 if the sales increase by $48.000 a months by how how much would you expect net operating in come to increase Increase in sale = $48,000 Total CM Ratio 65.48% Increase in Nel operating Income Increase in sale x Total CM Ratio $ 48,000 x 65.48% $ 31, 430,4 OR $ 31, 430 Increase in net operating lin.comes $ 31,430