Question

volue: 0.25 points Lucldo Products markets two computer games: Clalmjumper and Makeover. A contribution format income statement for a recent month for the two games appears beloW: Total Sales Vanable expensos Contribulionı margi Fxed expenses Net operating income S 106,000 S 53,000 ,540 44.460 159,000 47.700 111,300 82.320 39,160 $6G840 Required: 1. Compute the overall contribution margin (CM) ratio for the company all CM ralio 701% 2. Compute the overall break-even point for the company in dollar sales. (Do not round intermediate calculations. Round your answer to the nearest dollar amount.) S 117,600

Answer 1

1. Computation of overall contribution margin ratio (CM):

Overall CM ratio = Total contribution margin / Total sales * 100

                               =$111300/$159000*100

                               =70%

2. Computation of overall break-even point In sales dollar:

Overall break-even point= Total fixed expenses/overall CM ratio

                                              =$82320/70%

                                              =$117600

To prepare required income statement ,first determine the relative sales mix for the two products:
	Claimjumper	Makeover	Total
Original dollar sales	$106,000	$53,000	$159,000
Percent of total sales	66.66%	33.33%	100%
Sales at break even	$78,400	$39,200	$117,600
	Claimjumper	Makeover	Total
Sales at break even	$78,400	$39,200	$117,600
(-) Variable expenses	$28,964	$6,316	$35,280
Contribution margin	$49,436	$32,884	$82,320
(-)Fixed expenses			$82,320
Net operating income			$0

Note= Claimjumper variable expenses= ($78400/$106000)*$39160=$28964

             Makeover variable expenses= ( $39200/$53000)*8540=$6316