Question

Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for a recent month for the two games appears below:

	Claimjumper				Makeover			Total
Sales	$	102,000			$	51,000		$	153,000
Variable expenses		31,600				6,650			38,250
Contribution margin	$	70,400			$	44,350			114,750
Fixed expenses									88,650
Net operating income								$	26,100

Required:

1. What is the overall contribution margin (CM) ratio for the company?

2. What is the company's overall break-even point in dollar sales?

3. Prepare a contribution format income statement at the company's break-even point that shows the appropriate levels of sales for the two products

Answer 1

• All working forms part of the answer
• Requirement 1

A	Contribution margin	$          114,750.00
B	Sales	$          153,000.00
C = (A/B) x 100	Overall Contribution margin ratio	75%

• Requirement 2

A	Fixed Cost	$            88,650.00
B	Overall Contribution margin ratio	75%
C = A/B	Overall Break Even point in dollar sales	$          118,200.00

• Requirement 3

---Working

Working		Claimjumper	Makeover	Total
A	Sales	$          102,000.00	$           51,000.00	$        153,000.00
B = A / 153000	% of total sales	66.66667%	33.33333%
C = $ 118200 x B	Break Even sales	$            78,800.00	$           39,400.00	$        118,200.00

---Contribution margin format Income Statement

	Claimjumper	Makeover	Total
Sales	$                            78,800	$                    39,400	$            118,200
Variable expenses	$                            24,413	$                       5,137	$              29,550
Contribution margin	$                            54,387	$                    34,263	$              88,650
Fixed expenses			$              88,650
Net operating income			$                       -