Question

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 $ 110,000 $ 55,000 $ 165,000 Variable expenses 27,400 5,600 33,000 Contribution margin $ 82,600 $ 49,400 132,000 Fixed expenses 93,840 Net operating income $ 38,160 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.

Answer 1

Answer:

1. Overall contribution margin ratio for the company = 80%

2. Company's overall breakeven point in dollar sales = $117,300

3. Net operating income = $0

Explanation:

1. What is the overall contribution margin (CM) ratio for the company?

Overall contribution margin ratio for the company = (Total contribution margin / Total sales) * 100 = ($132,000 / $165,000) * 100 = 80%

2. What is the company's overall break-even point in dollar sales?

Company's overall breakeven point in dollar sales = Fixed cost / Contribution margin ratio = $93,840 / 80% = $117,300

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.

Note: See Part 3 of the attached excel file for the contribution format income statement at the company's break-even point that shows the appropriate levels of sales for the two products.

From the Part 3 of the attached excel file, we have:

Net operating income = $0