Business, 09.07.2019 03:30 countryboy42

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 $ 102,000 $ 51,000 $ 153,000 variable expenses 37,720 8,180 45,900 contribution margin $ 64,280 $ 42,820 107,100 fixed expenses 77,700 net operating income $ 29,400 required: 1. what is the overall contribution margin (cm) ratio for the company? 2. what is the company's overall break-even point in dollar sales? 3. prepare a contribution format income statement at the company's break-even point that shows the appropriate levels of sales for the two products.

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Answer from: vjacksongonzalez

1.The overall contribution margin ratio for the company is 0.70.

2. The company's overall break even point in dollar sales is $111,000.

3. Contribution format statement:

Claimjumper Makeover Total

Sales 74000 37000 111000

VC 27365.49025934.50980433300

Contribution 46634.5098 31065.4902 77700

Fixed Costs 77700

Net Income (contribution - fixed costs) 0

We follow these steps to arrive at the

1. Calculation of Contribution margin:

$Contribution Margin = \frac{Total Contribution}{Total Sales}$

$Contribution Margin = \frac{107100}{153000}$

Contribution Margin = 0.70

2. Calculation of Break Even Point in Dollar Sales:

$Break Even Point in dollar sales = \frac{Total Fixed Costs}{Contribution Margin}$

$Break Even Point in dollar sales = \frac{77,700}{0.7}$

Break Even Point in dollar sales = 111000

3. Contribution format income statement

First we find the ratios of Claimjumper's and Makeover's sales to total sales.

Similarly we need to find the ratios of these products' individual variable costs to total variable costs.

Sales:

Claimjumper $\frac{102000}{153000} = \frac{2}{3}$

Makeover $\frac{51000}{153000} = \frac{1}{3}$

Variable Costs

Claimjumper $\frac{37720}{102000} = 0.369803922$

Makeover $\frac{8180}{51000} = 0.160392157$

At breakeven sales, the contribution format for Claimjumper is as follows:

Claimjumper

Sales $111000*\frac{2}{3} = 74000$

less Variable Costs 74000 * 0.369803922 = 27365.4902

Contribution Margin 74000 - 27365.4902 = 46634.5098

At breakeven sales, the contribution format for Makeover is as follows:

Makeover

Sales $111000*\frac{1}{3} = 37000$

less Variable Costs 37000 * 0.160392157 = 5934.509804

Contribution Margin 37000 - 5934.509804 = 31065.4902

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Lucido products markets two computer games: claimjumper and makeover. a contribution format income...

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