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-White, Fragrant, and Loonzain. Budgeted sales by product and in total for the coming month are shown below Product White 48 % Fragrant 20% Loonzain 32 % Total 100 % Percentage of total sales Sales Variable expenses Contribution margin Fixed expenses Net operating income 355,200 100 % $148,000 100 % $236,800 100 % $740,000 100 % 48 % 52 % 355,200 384,800 228,800 $ 156,000 106,566 $ 248,640 30 % 118,400 80% 130, 240 55 % 70 % $ 29,600 20 % $ 106,560 45 % 228,800 0.52 Fixed expenses Dollar sales to break-even = $440,000 CM ratio As shown by these data, net operating income is budgeted at $156,000 for the month and the estimated break-even sales is $440,000 Assume that actual sales for the month total $740,000 as planned. Actual sales by product are: White, $236,800; Fragrant, $296,000 and Loonzain, $207,200 Required 1. Prepare a contribution format income statement for the month based on the actual sales data 2. Compute the break-even point in dollar sales for the month based on your actual data

Explanation / Answer

Part A

Gold star rice ltd.

Contribution income statement

Product

236800

(296000*80%)

57%

(421800/740000)

Part B

Breakeven point in dollar sales = fixed expenses / CM ratio = 228800/43% = $532,093

White Fragrant Loonzain Total Percentage of total sales 32%(236800/740000) 40% (296000/740000) 28% (207200/740000) Sales 236800 100% 296000 100% 207200 100% 740000 100% Variable expenses 71040 (236800*30%) 30%

236800

(296000*80%)

80% 113960 (207200*55%) 55% 421800

57%

(421800/740000)

Contribution margin 165760 (236800*70%) 70% 59200 (296000*20%) 20% 93240 (207200*45%) 45% 318200 43% (318200/740000) Fixed expenses 228800 Net operating income 89400

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