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	$	98,000			$	49,000		$	147,000
Variable expenses		30,400				6,350			36,750
Contribution margin	$	67,600			$	42,650			110,250
Fixed expenses									85,500
Net operating income								$	24,750

Required:

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

Contribution Income Statement
	Claimjumper	Makeover	Total
Sales	$          76,000	$       38,000	$ 1,14,000
Variable expenses	$          23,576	$         4,924	$     28,500
Contribution Margin			$     85,500
Fixed expenses			$     85,500
Net Income (loss)			0

	Workings:
	Contribution margin ratio	=	Total Contribution / Total Sales
		=	$110250 / $147000
		=	75%
	Break-even point in dollars	=	Total Fixed costs /Contribution margin ratio
		=	$85500/ 75%
		=	$   1,14,000

			Claimjumper	Makeover	Total
(a)	Sales	=	$       98,000	$     49,000	$                     1,47,000
(b) = (a) / $147000	Ratio of sales to total sales	=	67%	33%
(c) = (b) X $114000	Allocated breakeven sales	=	$       76,000	$     38,000	$                     1,14,000
(d)	Variable cost	=	$       30,400	$       6,350	$                         36,750
(e) = (d) / (a)	Ratio of variable cost to sales	=	31%	13%
(c) X (e)	Variable cost at break even	=	$       23,576	$       4,924	$                         28,500