Gold Star Rice, Ltd., of Thailand exports Thai rice throughout Asia. The company

Question

Gold Star Rice, Ltd., of Thailand exports Thai rice throughout Asia. The company grows three varieties of rice-Fragrant, White, and Loonzain. Budgeted sales by product and in total for the coming month are shown below Product White 48% Total 100% Fragrant Loonzain S2% Percentage of total sales Sales 20% $331,200 100% $138,000 100% $220,800 100% $690,000 100% 99,360 30% 110,400 80% 121,440 55% 331,200 48% Variable expenses $231,840 70% $27,600 20% $99.360 45% 358,800 52% Contribution margirn Fixed expenses 233,480 Net operating income S 125,320 $233480 -$449,000 Dollar sales to break evenXed expenses As shown by these data, net operating income is budgeted at $125,320 for the month and break even Assume that actual sales for the month total $690,000 as planned. Actual sales by product are: White CM ratio 0.52 sales at $449,000 $220,800, Fragrant, $276,000, and Loonzain, $193,200

Explanation / Answer

Part 1

Gold star rice ltd.

Contribution income statement

Product

57

(393300/690000)

296700

(690000-393300)

43

(296700/690000)

Part 2

Breakeven point in dollars sales = fixed expenses / contribution margin ratio = 233480/43% = $542,977

White Fragrant Loonzain Total Percentage of sales (220800/690000) = 32% (276000/690000) = 40% (193200/690000) = 28% 100% Sales 220800 100 % 276000 100 % 193200 100 % 690000 100 % Variable expenses 66240 (220800*30%) 30 % 220800 (276000*80%) 80 % 106260 55 % 393300 (66240+220800+106260)

57

(393300/690000)

% Contribution margin 154560 70 % 55200 20 % 86940 45%

296700

(690000-393300)

43

(296700/690000)

% Fixed expenses 233480 Net operating income 63220

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