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	$	118,000	$	59,000	$	177,000
Variable expenses		29,320		6,080		35,400
Contribution margin	$	88,680	$	52,920		141,600
Fixed expenses						93,120
Net operating income					$	48,480
Required: 1. Compute the overall contribution margin (CM) ratio for the company.        2. Compute the overall break-even point for the company in dollar sales. (Do not round intermediate calculations. Round your final answer to the nearest dollar amount.)        3. Complete the contribution format income statement at break-even point for the company showing the appropriate levels of sales for the two products. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.)

Answer 1

1	Compute the overall contribution margin (CM) ratio for the company.
	Contribution margin ratio = Contribution margin/Sales*100
Ans	Contribution margin	$141,600
	Sales	$177,000
	Contribution margin = 141,600/177,000	80%
2	Compute the overall break-even point for the company in dollar sales.
	Break even point = Fixed cost/Contribution margin %
Ans	Fixed cost	$93,120
	Contribution margin %	80%
	Break even point =$93,120/80%	$116,400
3	Complete the contribution format income statement at break-even point for the company showing the appropriate levels of sales for the two products.
	Particulars	Claimjumper	Makeover	Total
	Contribution margin	$88,680	$52,920	$141,600
	Contribution margin % (share)	62.63%	37.37%	100.00%
	Variable cost (A)	$29,320	$6,080	$35,400
	Sales(B)	$118,000	$59,000	$177,000
	Sales % share (C)	67%	33%	100%
	variable cost % (D=A/B)	24.85%	10.31%	20.00%
Ans	Contribution margin income statement at break even
	Particulars	Claimjumper	Makeover	Total
	Sales ($116,400 in 67% & 33% ratio from C above)	$77,600	$38,800	$116,400
	Variable cost (24.85% & 10.31% from D above)	$19,282	$3,998	$23,280
	Contribution margin (Sales- Variable cost)	$58,318	$34,802	$93,120
	LESS: Fixed cost			$93,120
	Net income (Contribution - fixed costs)			$0.00