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																	228,280
Net operating income																$	182,520

Dollar sales to break-even	=	Fixed expenses	=	$228,280	= $439,000
		CM ratio		0.52

As shown by these data, net operating income is budgeted at $182,520 for the month and the estimated break-even sales is $439,000. Assume that actual sales for the month total $790,000 as planned. 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.

Prepare a contribution format income statement for the month based on the actual sales data.

• Required 2

Compute the break-even point in dollar sales for the month based on your actual data. (Round your answer to the nearest whole dollar amount.

Break-even point in dollar sales

Answer 1

1) Contribution format income statement based on the actual sales:
	PRODUCTS
	White	%age	Fragrant	%age	Loonzain	%age	Total	%age
Percentage of total sales
Sales	252800	100	316000	100	221200	100	790000	100
Variable expenses	75840	30	252800	80	121660	55	450300	57
Contribution margin	176960	70	63200	20	99540	45	339700	43
Fixed expenses							228280
Net operating income							111420
2) Break even point, dollar sales = Fixed exp. / CM ratio = 228280 / 0.43 = $530884