Sales Mix; Multiproduct Break-Even Analysis
Marlin Company, a wholesale distributor, has been operating for only a few months. The company sells three products–sinks, mirrors, and vanities, Budgeted sales by product and in total for the coming month are shown below:
Product | ||||||||
Sinks | Mirrors | Vanities | Total | |||||
Percentage of total sales | 48% | 20% | 32% | 100% | ||||
Sales | $,240,000 | 100% | $100,000 | 100% | $160,000 | 100% | $500,00 | 100% |
Variableexpenses | 72,000 | 30% | 80,000 | 80% | 88,000 | 55% | 240,000 | 48% |
Contribution margin | $168,000 | 70% | $ 20.000 | 20% | $ 72,000 | 45% | 260,000 | 52% |
Fixed expenses | 223,600 | |||||||
Net operating income | $ 36.400 |
As shown by these data net operating income is budgeted at $36.400 for the month and break-even sales at $430.000.
Assume that actual sales for the month total $500,000 as planned Actual sales by product are: sinks $160.000: mirrors. $200.000: and vanities $140.000.
Required:
1. Prepare a contribution form at income statement for the month based on actual sales data. Present the income statement in the format shown above.
2. Compute the break-even point in sales dollars for the month based on your actual data.
3. Considering the fact that the company met its $500.000 sales budget for the month the president is shocked at the results shown on your income statement in (1) above. Prepare a brief memo for the president explaining why both the operating results and the break-even point in sales dollars are different from what was budgeted
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