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: White Percentage of total sales Sales Variable expenses Contribution margin Fixed expenses Net operating income $ 374,400 112,320 $ 262,080 100 % 30 % 70 % Product Fragrant Loonzain 20 % 32 % $ 156,000 100 % $ 249,600 100 % 124,800 80% 137,280 55 % $ 31,200 20 % $ 112,320 45 % Total 100 % $ 780,000 374,400 405, 600 230, 360 $ 175, 240 100 % 48% 52 % Dollar sales to break-even Fixed expenses CM ratio $ 230, 360 0.52 = $443,000 As shown by these data, net operating income is budgeted at $175,240 for the month and the estimated break-even sales is $443,000. Assume that actual sales for the month total $780,000 as planned. Actual sales by product are: White, $249,600; Fragrant, $312,000; and Loonzain, $218,400. 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

Gold Star Rice Ltd

Contribution income statement

Product

	White		Fragrant		Loonzain		Total
Percentage of total sales	32%		40%		28%		100%
Sales	249600	100%	312000	100%	218400	100%	780000	100%
Variable expense	74880	30%	249600	80%	120120	55%	444600	57%
Contribution margin	174720	70%	62400	20%	98280	45%	335400	43%
Fixed cost							230360
Net income							105040

Break even sales = 230360/.43 = 535721