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 $ 96,000 $ 48,000 $ 144,000 Variable expenses 24,040 4,760 28,800 Contribution margin $ 71,960 $ 43,240 115,200 Fixed expenses 94,560 Net operating income $ 20,640 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

• [1]
  Overall contribution margin = Overall contribution margin / Overall total sales
  = ($115200 / $ 144000) x 100
  = 80%
• [2]
  Overall break even point in dollars = Fixed expenses / overall CM ratio
  = $ 94560 / 80%
  = $ 118,200
• [3]

	Claimjumper	Makeover	Total
Percent of total sales	66.6667%	33.3333%	100%
Sales	$78,800	$39,400	$118,200
Variable expenses	$19,733	$3,907	$23,640
Contribution margin	$59,067	$35,493	$94,560
Fixed expenses			$94,560
Net Operating Income			$0