Exercise 5-10 (Algo) Multiproduct Break-Even Analysis (LO5-9] Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for a recent month for the two games appears below: Sales Variable expenses Contribution margin Fixed expenses Net operating income claimjumper $ 118,000 36,400 $ 81,600 Makeover $ 59,000 7,850 $ 51,150 Total $ 177,000 44,250 132,750 87,075 $ 45, 675 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. Required 1 Required 2 Required 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. (Do not round intermediate calculations. Round your answers to the nearest dollar amount.) Lucido Products Contribution Income Statement Claimjumper Makeover Total $ $ 0 0 Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) $ 0 $ 0 0 0 $ 0 Magic Realm, Inc., has developed a new fantasy board game. The company sold 16,800 games last year at a selling price of $70 per game. Fixed expenses associated with the game total $252,000 per year, and variable expenses are $50 per game. Production of the game is entrusted to a printing contractor. Variable expenses consist mostly of payments to this contractor. Required: 1-a. Prepare a contribution format income statement for the game last year. 1-b. Compute the degree of operating leverage. 2. Management is confident that the company can sell 21,000 games next year (an increase of 4,200 games, or 25%, over last year). Given this assumption: a. What is the expected percentage increase in net operating income for next year? b. What is the expected amount of net operating income for next year? (Do not prepare an income statement; use the degree of operating leverage to compute your answer.) Req 1A Reg 1B Reg 2 Prepare a contribution format income statement for the game last year. Magic Realm, Inc., Contribution Income Statement Total Sales Variable expenses Contribution margin Fixed expenses $ 1,176,000 12,600,000 (11,424,000) 252,000 Per Unit $ 70 50 $ 20 Net operating income (11,676,000) Req 1A Reg 1B Reg 2 Compute the degree of operating leverage. Degree of operating leverage Req 1A Req 1B Reg 2 Management is confident that the company can sell 21,000 games next year (an increase of 4,200 games, or 25%, over last year). Given this assumption: a. What is the expected percentage increase in net operating income for next year? b. What is the expected amount of net operating income for next year? (Do not prepare an income statement; use the degree of operating leverage to compute your answer.) Show less % a. Net operating income increases by b. Total expected net operating income Exercise 5-7 (Algo) Target Profit Analysis [LO5-6] Lin Corporation has a single product whose selling price is $130 per unit and whose variable expense is $65 per unit. The company's monthly fixed expense is $32,550. Required: 1. Calculate the unit sales needed to attain a target profit of $3,850. (Do not round intermediate calculations.) 2. Calculate the dollar sales needed to attain a target profit of $8,100. (Round your intermediate calculations to the nearest whole number.) 560 units 1. Units sales to attain target profit 2. Dollar sales to attain target profit
