Question 1

Lucido Products markets two computer games: Claimjumper and Makeover. A contribution format income statement for a recent month for the two games appears below:

	Claimjumper	Makeover	Total
Sales	$ 120,000	$ 60,000	$ 180,000
Variable expenses	37,000	8,000	45,000
Contribution margin	$ 83,000	$ 52,000	135,000
Fixed expenses			85,275
Net operating income			$ 49,725

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.

What is the overall contribution margin (CM) ratio for the company?

Overall CM ratio

%

• What is the company's overall break-even point in dollar sales? (Do not round intermediate calculations.)

• Overall break-even point

• 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
  Sales
  Variable expenses
  Contribution margin
  Fixed expenses
  Net operating income (loss)

• Question 2

• Miller Companys contribution format income statement for the most recent month is shown below:

  	Total	Per Unit
  Sales (41,000 units)	$ 410,000	$ 10.00
  Variable expenses	287,000	7.00
  Contribution margin	123,000	$ 3.00
  Fixed expenses	44,000
  Net operating income	$ 79,000

  Required:

  (Consider each case independently):

  1. What is the revised net operating income if unit sales increase by 14%?

  2. What is the revised net operating income if the selling price decreases by $1.40 per unit and the number of units sold increases by 23%?

  3. What is the revised net operating income if the selling price increases by $1.40 per unit, fixed expenses increase by $8,000, and the number of units sold decreases by 5%?

  4. What is the revised net operating income if the selling price per unit increases by 10%, variable expenses increase by 30 cents per unit, and the number of units sold decreases by 12%?

  Net Operating Income

• Net Operating Income

• Net Operating Income

• Net Operating Income

• Question 3

• Outback Outfitters sells recreational equipment. One of the companys products, a small camp stove, sells for $90 per unit. Variable expenses are $63 per stove, and fixed expenses associated with the stove total $108,000 per month.

  Required:

  1. What is the break-even point in unit sales and in dollar sales?

  2. If the variable expenses per stove increase as a percentage of the selling price, will it result in a higher or a lower break-even point? (Assume that the fixed expenses remain unchanged.)

  3. At present, the company is selling 19,000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes.

  4. Refer to the data in Required 3. How many stoves would have to be sold at the new selling price to attain a target profit of $72,000 per month?

• Required 1
• Required 2
• Required 3
• Required 4

• Break-even point in unit sales
  Break-even point in dollar sales

  What is the break-even point in unit sales and in dollar sales?

• At present, the company is selling 19,000 stoves per month. The sales manager is convinced that a 10% reduction in the selling price would result in a 25% increase in monthly sales of stoves. Prepare two contribution format income statements, one under present operating conditions, and one as operations would appear after the proposed changes.

  Outback Outfitters
  Contribution Income Statement	Stoves - Present		Stoves - Proposed
  	19000
  	Total	Per unit	Total	Per unit
  	0	$0	0	$0

• Refer to the data in Required 3. How many stoves would have to be sold at the new selling price to attain a target profit of $72,000 per month? (Round up your final answer to the nearest unit.)

  Unit sales needed to attain the target profit