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In: Accounting

Gold Star Rice, Ltd., of Thailand exports Thai rice throughout Asia. The company grows three varieties...

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 $ 321,600 100 % $ 134,000 100 % $ 214,400 100 % $ 670,000 100 % Variable expenses 96,480 30 % 107,200 80 % 117,920 55 % 321,600 48 % Contribution margin $ 225,120 70 % $ 26,800 20 % $ 96,480 45 % 348,400 52 % Fixed expenses 226,720 Net operating income $ 121,680 Dollar sales to break-even = Fixed expenses = $226,720 = $436,000 CM ratio 0.52 As shown by these data, net operating income is budgeted at $121,680 for the month and the estimated break-even sales is $436,000. Assume that actual sales for the month total $670,000 as planned. Actual sales by product are: White, $214,400; Fragrant, $268,000; and Loonzain, $187,600. Required: 1. Prepare a contribution format income statement for the mon,th based on the actual sales data. 2. Compute the break-even point in dollar sales for the month based on your actual data.

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Expert Solution

Answer:

1.)

Gold Star Rice, Ltd.
Contribution Margin Income Statement
For Year Ended December 31,20XX
Product White    Fragrant Loonzain Total
Sales 214400.00 268000.00 187600.00 670000.00
Variable expenses 64320.00 214400.00 103180.00 381900.00
Contribution margin 150080.00 53600.00 84420.00 288100.00
Fixed expenses 226720.00
Net Income 61380.00

Working:

Gold Star Rice, Ltd.
Contribution Margin Income Statement
For Year Ended December 31,20XX
Product White    Fragrant Loonzain Total
Sales 214400 268000 187600 670000
Variable expenses =214400*0.3 =268000*0.8 =187600*0.55 =64630+214400+103180

.

2.)

Break-even point in dollar sales:

break-even point in dollar sales = Fixed Cost ÷ Contribution margin ratio

Fixed Costs = $226,720

Contribution Margin ratio = Contribution Margin ÷ Sales

= 288100 ÷ 670000

= 43% or .43

Therefore,

Break-even point in dollar sales = $266,720 ÷ .43

Break-even point in dollar sales = $6,20,279.07


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