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% $360,000 108,000 $ 252,000 Product Fragrant Loonzain 20$ 32% 100 $ 150,000 100% $ 240,000 100 38 120,000 88 132,000 55 799 $ 30,000 20 % $ 108,000 45 Total 100 $ 750,000 360,000 390,000 230,888 $ 159, 120 100 48% 52% Dollar sales to break-even Fixed expenses CM ratio $230,880 0.52 = $444,000 As shown by these data, net operating income is budgeted at $159,120 for the month and the estimated break-even sales is $444,000. Assume that actual sales for the month total $750,000 as planned; however, actual sales by product are: White, $240,000; Fragrant, $300,000; and Loonzain, $210,000 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 dato.

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	240000	100%	300000	100%	210000	100%	750000	100%
Variable expenses	72000	30%	240000	80%	115500	55%	427500	57%
Contribution margin	168000	70%	60000	20%	94500	45%	322500	43%
Fixed expenses							230880
Net operating income							91620

Required 2 :
Break-even point in dollar sales = Total Fixed expense / Contribution margin ratio of company = 230880 / 43% =	536930