Jericho, a bathroom materials distributor, has been operating for only a few months. The Company sells three products, sinks, mirrors and vanities. Following are budgeted sales by product and in total for the coming month.

Cost item	Sinks	Mirrors	Vanities	Total
Percentage of Total Sales	48 %	20%	32%	100%
Sales	$240,000 100%	$100,000 100%	$160,000 100%	$500,000 100%
Variable expense	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 expense				223,600
Net Operating Income				$ 36,400

Dollar sales to break even = Fixed expenses = $223,600 = $430,000

CM ratio 0.52

As indicated by the preceding data, net operating income is budgeted at $36,400 for the month and break even sales at $430,000

Consider that actual sales for the month total $500,000 as planned. Actual sales by product are: sinks$160,000; mirrors$200,000; and vanities $140,000

Question:

(a) Prepare a contribution format income statement for the month based on the actual sales data and the budgeted variable expense percentage. Present the income statement using the above format.

(b) Compute the break-even point in sales dollars for the month, based on your actual data calculated from part #1.

(c) Considering that the Company met its $500,000 sales budget for the month, the Jerichos President is shocked at the results shown in your income statement from part #1. Prepare a brief memo for the President explaining why the both the operating results and the break-even point in sales dollars are different from what was budgeted.