PROB 1 BREAK EVEN POINT MULTIPLE PRODUCTS

China Corporation produces two computer games, Ping and Pong. A contribution margin format

income statement for a recent month for the two games appears below:

Ping Pong Total

Sales 100,000 50,000 150,000

Variable Expenses 25,000 5,000 30,000

Contribution Margin 75,000 45,000 120,000

Fixed Expenses 90,000

Net Operating Income 30,000

Required:

1. Compute the weighted average contribution margin ratio

2. Compute the break-even point in terms of sales

3. Compute the break-even point in terms sales of Ping and Pong respectively

PROB 2 MARGIN OF SAFETY

Mama Corporation is a distributor of sun umbrella used at resort hotel. The data are as follows:

Selling Price 25 per unit

Variable Expenses 15 per unit

Fixed Expenses 8,500 per month

Unit sales 1,000 units per month

Required:

1. Compute the margin of safety in terms of units

2. Compute the margin of safety in terms of sales

PROB 3 OPERATING LEVERAGE

F Company installs home theater system. The company data are as follows:

Selling Price 120,000

Variable Expenses 84,000

Contribution Margin 36,000

Fixed Expenses 24,000

Net Income 12,000

Required:

1. Compute the degree of operating leverage

2. If there will be an increase of 10% in sales, estimate the impact in the net income.