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

Question

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 Sure Shot $670,000 330,000 1,000,000 Flight Dynamic Total Sales CM ratio 69% 72% Fixed expenses total $576,000 per month. Required: 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 $55,000 a month, by how much would you expect the monthly net operating income to increase?

Explanation / Answer

Flight Dynamic Sure Shot Total company Sales 670000 100.00% 330000 100.00% 1000000 100.00% Variable expenses 207700 31.00% 92400 28.00% 300100 30.01% Contribution margin 462300 69.00% 237600 72.00% 699900 69.99% Fixed expenses 576000 Net operating income 123900 2 Break even point = 576000/69.99%=$822975 3 Net operating income increases by 55000*69.99%= $38495

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