Question

# Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for a...

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 \$96,000 \$48,000    \$144,000

Variable Expenses    \$24,040 \$4,760    \$28,800

Contribution margin \$71,960    \$43,240 \$115,200

Fixed Expenses    \$90,000

Net operating income \$25,200

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 as the company's break-even point that shows the appropriate level of sales for the the two products.

1.

The overall contribution margin(CM) ratio for the company : Total contribution margin / Total sales

= 115200 / 144000 = 80%

2.

The company's overall break-even point in dollar sales: Total fixed expense / Overall CM ratio

= 90000 / .8 = \$112500

3.

To construct the income statement we must first determine the sales mix

 Particulars Claimjumper makeover Total Original dollar sales 96000 48000 144000 % of total 67% 33% 100% Sales at breakeven 75000 37500 112500 Particulars Claimjumper makeover Total Sales 75000 37500 112500 LESS: variable expense* 18781.25 3718.75 22500 Contrinbution margin 56218.75 33781.25 90000 Less: fixed expenses 90000 Net operating income 0 * claimjumper variable expense = (24040/96000)*75000 = 18781.25 *makeover variable expense = (4760/48000)*37500 = 3718.75

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