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 $ 30,000 $70,000 $100,000
Variable expenses 20,000 50,000 70,000
Contribution margin $ 10,000 $ 20,000 30,000
Fixed expenses 24,000
Net operating income $ 6,000
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:

See below

Explanation:

1. Overall contribution margin ratio for the company

= (Total contribution margin ÷ Total sales) × 100

= ($30,000 ÷ $100,000) × 100

= 0.3 × 100

= 30%

2. Company's overall break even point in dollar sales

= Fixed cost/Contribution margin ratio

= $24,000 / 0.3

= $80,000

3. Contribution format at break even point.

•Claim jumpover

Sales

$30,000

Less

Variable cost

($20,000)

Contribution margin

$10,000

•Makeover

Sales

$100,000

Less

variable cost

($50,000)

Contribution margin

$50,000