Question

Problem 5-21 Sales Mix; Multiproduct Break-Even Analysis [LO5-9]

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:

	Product
	White					Fragrant					Loonzain					Total
Percentage of total sales		48	%				20	%				32	%				100	%
Sales	$	331,200		100	%	$	138,000		100	%	$	220,800		100	%	$	690,000		100	%
Variable expenses		99,360		30	%		110,400		80	%		121,440		55	%		331,200		48	%
Contribution margin	$	231,840		70	%	$	27,600		20	%	$	99,360		45	%		358,800		52	%
Fixed expenses																	225,160
Net operating income																$	133,640

Dollar sales to break-even	=	Fixed expenses	=	$225,160	= $433,000
		CM ratio		0.52

As shown by these data, net operating income is budgeted at $133,640 for the month and the estimated break-even sales is $433,000.

Assume that actual sales for the month total $690,000 as planned. Actual sales by product are: White, $220,800; Fragrant, $276,000; and Loonzain, $193,200.

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

1)
		product
			White		Fragrant		Loonzain		total
percentage of total sales			32.00%		40.00%		28.00%
Sales			220,800	100%	276,000	100%	193,200	100%	690,000	100%
Variable expenses			66240	30%	220800	80%	106260	55%	393300	57.00%
Contribution margin			154560	70%	55200	20%	86940	45%	296700	43.00%
Fixed expenses									225,160
Net operating income									71,540
2)	Dollar sales to breakeven
	225,160/43%
	523627.9
	or $523,628