Question

Rastacan Enterprises distributes two products: Model X300 and Model Z900. Monthly sales and the contribution margin ratios for the two products follow:

Product : Model X300        Model Z900 Total                     
Sales: $700,000 $300,000 $1,000,000
Contribution Margin Ratio 60% 70% ?   

The company's fixed expenses total $598,500 per month.

1. Prepare a contribution-format income statement for the company as a whole.
2. Compute the break-even point for the company based on the current sales mix.
3. If sales increase by $50,000 per month, by how much would you expect operating income to increase? What are your assumptions?

Answer 1