Barnes Company sells three products: A, B, and C. Budgeted sales by product and in total for the coming month are as follows:

Product A Product B

% of total sales 48% 20%

Sales 240,000 100% $100,000 100%

Variable exp. 72000 30 80,000 80

Contribution mar. 168,000 70 20,000 20

Fixed expense

PRODUCT C Total

% of total sales 32% 100%

Sales 160,000 100%. 500,000. 100%

Variable exp. 88,000 55 240,000. 48

Contribution margin 72,000 45 260,000 52

Fixed expense 223,600

Operating income 36,400

Break-even sales - Budgeted: Fixed Expenses / CM Ratio

= $223,600 / 0.52

$430,000.00

As shown by these data, operating income is budgeted at $36,400 for the month, and break-even sales at $430,000.

Assume that actual sales for the month total $500,000 as planned.

Actual sales by product are:

A $160,000

B $200,000

C $140,000

Required:

a) Prepare a contribution income statement for the month based on actual sales data. Assume variable expenses as a percentage of sales and total fixed expenses are the same as budgeted.

Present the income statement in the format shown in the images above.

b) Compute break-even sales for the month, based on actual data.

c) Explain why the company did not meet the budgeted operating results or break-even sales even though it met its $500,000 sales budget.