Question

Lucky Products markets two computer games: Predator and Runway. A contribution format income statement for a recent month for the two games appears below:
Predator Runway Total

Sales $114,000 $57,000 $171,000

Variable expenses 42,040 9,260 51,300

Contribution margin $71,960 $47,740 119,700

Fixed expenses 78,750

Net operating income $40,950


Required:

Complete the contribution format income statement at the break-even point for the company showing the appropriate levels of sales for the two products. (Do not round intermediate calculations. Round your final answers to the nearest dollar amount.)

Answer 1

Answer:

Contribution format income statement at the break-even point

                                       Predator     Runway      Total

Sales                               $75,000    $37,500    $112,500

Variable expenses         $27,660    $6,090      $33,750

Contribution margin       $47,340    $31,410      $78,750

Fixed expenses                                                   $78,750

Net operating income                                         $0          

Explanation:

                                 Predator     Runway       Total

Sales                         $114,000    $57,000     $171,000

Sales Ratio                66.67%      33.33%        100%

Variable expenses   $42,040    $9,260       $51,300

V.C Ratio                    36.88%     16.24%        30%

Contribution margin $71,960     $47,740     $119,700

CM Ratio                    63.12%       83.76%      70%

Weight. Avg. Cont.    42.08%      27.92%      70%

Fixed expenses                                              78,750

Break-even (78,750/70%)                              112,500

Net operating income                                   $40,950

Weighted Average contribution = (63.12% X 66.67%) + (83.76% X 33.33%)

Weighted Average contribution = 42.08% + 27.92% = 70%

Sales of Predator = 112,500 x 66.67% = $75,000

Sales of Runway = 112,500 x 33.33% = $37,500