1. In the bedroom furniture division budgeted sales by division and in total for the following month are as follows:

French Meditrainian Welsh Total

Percent of total sales 48% 20% 32% 100%

Sales $240,000 100% $100,000 100% $ 160,000 100% $500,000 100%

Variable expenses $72,000 30% $80,000 80% $ 88,000 55% $240,000 48%

Contribution Margin $168,000 70% $20,000 20% $ 72,000 45% $260,000 52%

Fixed expenses $223,600

Operating income $36,400

Breakeven point in sales dollars = Fixed expenses = $223,600 = $430,000

CM ratio 0.52

As shown by this data, operating income is budgeted at $36,400 for the month and breakeven sales are $430,000.

Assume actual sales for the month total $500,000 as planned. Actual sales by divisions are $French - $160,000; Meditrainian - $200,000 and Welsh - $140,000.

Prepare a contribution income statement for actual sales based on the above data and explain why the operating income is not as budget.