Exercise 5-10 Multiproduct Break-Even Analysis [LO5-9] Lucido Products markets t
ID: 2340580 • Letter: E
Question
Exercise 5-10 Multiproduct Break-Even Analysis [LO5-9]
Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for a recent month for the two games appears below:
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.
Claimjumper Makeover Total Sales $ 114,000 $ 57,000 $ 171,000 Variable expenses 42,040 9,260 51,300 Contribution margin $ 71,960 $ 47,740 119,700 Fixed expenses 80,220 Net operating income $ 39,480Explanation / Answer
1) Overall Contribution margin Ratio = Total contribution margin/total sale =119700/171000= 0.7 i.e. 70% 2) calculation of the overall break even point for the company in sales dollars Break even sales dollars = total fixed expenses/contribution margin ratio Break even sales dollars = 80220/70% = 114600 3) particulars Claimjumper makeover total Original sales 114000 57000 171000 percentage of total sale 67% 33% sale at break even 76400 38200 114600 Contribution format income statement particulars Claimjumper makeover total Sale 76400 38200 114600 less: Variable expenses *** 28174 6206 34380 Contribution margin 48226 31994 80220 less: fixed expenses 80220 Net operating income 0 therefore net income at break even level is ZERO *** variable expenses = sale/original sale* variable exp = 76400/114000*42040 Make over's Variable expenses = 38200/57000*9260 = 6206
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