Question

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	$	379,200		100	%	$	158,000		100	%	$	252,800		100	%	$	790,000		100	%
Variable expenses		113,760		30	%		126,400		80	%		139,040		55	%		379,200		48	%
Contribution margin	$	265,440		70	%	$	31,600		20	%	$	113,760		45	%		410,800		52	%
Fixed expenses																	232,440
Net operating income																$	178,360

Dollar sales to break-even	=	Fixed expenses	=	$232,440	= $447,000
		CM ratio		0.52

As shown by these data, net operating income is budgeted at $178,360 for the month and the estimated break-even sales is $447,000.

Assume that actual sales for the month total $790,000 as planned; however, actual sales by product are: White, $252,800; Fragrant, $316,000; and Loonzain, $221,200.

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

Contribution Margin Income Statement
	White	Fragrant	Loonzian	Total
Sales	$                     252,800	$                      316,000	$                221,200	$         790,000
Less:Variable expenses	$                       75,840	$                      252,800	$                121,660	$         450,300
Contribution Margin	$                     176,960	$                        63,200	$                  99,540	$         339,700
Less:Fixed expenses				$         232,440
Net Operating Income				$         107,260
Contribution Margin ratio =$339,700 / $790,000 =0.43 or 43%
Break-even Point in dollar Sales =$232,440 / 0.43 =$540,558