3 Olongapo Sports Corporation distributes two premium golf balls-Flight Dynamic

Question

3 Olongapo Sports Corporation distributes two premium golf balls-Flight Dynamic and Sure Shot. Monthly sales and the contribution margin ratios for the two products follow Product Flight Shot Total Sales CM ratio 720,000 280,000 1,000,000 63 73% Fixed expenses total $590,000 per month. Required: eBook 1. Prepare a contribution format income statement for the company as a whole. 2. What is the company's break-even point in dollar sales based on the current sales mix? 3. If sales increase by $52,000 a month, by how much would you expect the monthly net operating income to increase? Hint Complete this question by entering your answers in the tabs belovw Print Required 1 Required 2 Required 3 Prepare a contribution format income statement for the company as a whole. (Round your percentage answers to 2 decimal places (l.e. 0.1234 should be entered as 12.34).) Flight Dynamic Sure Shot Total Company Amount Amount 0.001% 0.00% | ol 0001% Prex 13 of 15

Explanation / Answer

1 Flight Dynamic Sure Shot Total Company % % % Sales 720000 100% 280000 100% 1000000 100% Variable Expenses 266400 37% 75600 27% 342000 34.20% Contribution margin 453600 63% 204400 73% 658000 65.80% Fixed Expenses 590000 Net operating income 68000 *658000/100000 = 65.8 2 The break-even point for the company as a whole Is Dollar sales to break-even Fixed expenses/Overall CM Ratio 590000/.658 896656.53 3 The additional contribution margin from the additional sales is computed as follows 52000*65.8% 34216 Assuming no change in fixed expenses, all of this additional contribution margin of $34,216 should drop to the bottom line as increased net operating income. This answer assumes no change in selling prices, variable costs per unit, fixed expense, or sales mix.

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