Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for a recent month for the two games appears below:

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	$	110,000			$	55,000		$	165,000
Variable expenses		40,600				8,900			49,500
Contribution margin	$	69,400			$	46,100			115,500
Fixed expenses									81,900
Net operating income								$	33,600

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.

Explanation

1.

The overall contribution margin ratio can be computed as follows:

Overall CM ratio	=	Total contribution margin
		Total sales
	=	$115,500	= 70%
		$165,000

2.

The overall break-even point in dollar sales can be computed as follows:

Overall break-even	=	Total fixed expenses
		Overall CM ratio
	=	$81,900	= $117,000
		70%

3.

	Claimjumper			Makeover			Total
Original dollar sales	$	110,000		$	55,000		$	165,000
Percent of total		66.67	%		33.33	%		100	%
Sales at break-even	$	78,000		$	39,000		$	117,000

Variable expenses:

Claimjumper variable expenses: ($78,000/$110,000) × $40,600 = $28,789

Makeover variable expenses: ($39,000/$55,000) × $8,900 = $6,311

Thanks