232 Chapter 5 [LOs-91 PROBLEM 5-21A Sales Mix; Multiproduct Break-Even Analysis

Question

232 Chapter 5 [LOs-91 PROBLEM 5-21A Sales Mix; Multiproduct Break-Even Analysis Gold Star Rice. Ltd., of Thailand exports Thai rice throughout Asia. The company grows three varieties of rice-Fragrant, White, and Loonzain. Budgeted sales by product and in total for the coming month are shown below: Product Fragrant 52% $300,000 Loonzain 28% $210,000 Total 100% $750,000 White Percentage of total sales Sales. .. Variable expenses Contribution margin 20% $150,000 100% 100% 100% 100% 108,000 72% 78,000 20% 84,000 40% 270,000 36% $42.000 28% S3 12,000 80% $126,000 60% 480,000 64% 449,280 $ 30,720 Net operating income . Dollar sales to Fixed expenses $449,280 break even CM ratio 0.64 3702,000 sales at $702,000. 300,000; Fragrant, $180,000: and Loonzain, $270,000. Required: As shown by these data, net operating income is budgeted at $30,720 for the month and break-even Assume that actual sales for the month total $750,000 as planned. Actual sales by product are: White. 1. Prepa re a contribution format income statement for the month based on actual sales data. Present t he income statement in the format shown above. Compute the break-even point in dollar sales for the month based on your actual data. Considering the fact that the company met its $750,000 sales budget for the month, the shocked at the results shown on your income statement in (1) above. Prepare a brief memo 2. 3. president explaining why hoth the operating results and the break-even point in dollar sales n for the different from what was budgeted.

Explanation / Answer

Income Statement Product White Fragrant Loonzian Total Percentage of Total Sales 40% 24% 36% 100% Sales $300,000 100% $180,000 100% $270,000 100% $750,000 100% Variable Expense $216,000 72% $36,000 20% $108,000 40% $360,000 48% Contribution Margin $84,000 28% $144,000 80% $162,000 60% $390,000 52% Fixed Expense $449,280 Net Operating Income (Loss) -$59,280 2. Computation of BEP dollar Sales =Fixed Expense/Conribution Margin Ratio =$449280/52%= $864000 3. As per Sales Mix as per Budgeted sales and Actulal sales are all together are different. Hence Overall contribution margin ratio has reduced which has alos impacted on BEP Dollar Sales

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