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:

As shown by these data, net operating income is budgeted at $128,960 for the month and the estimated break-even sales is $442,000.

Assume that actual sales for the month total $690,000 as planned. Actual sales by product are: White, $220,800; Fragrant, $276,000; and Loonzain, $193,200.

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.

Product White Fragrant Loonzain Total Percentage of total sales 48 % 20 % 32 % 100 % Sales $ 331,200 100 % $ 138,000 100 % $ 220,800 100 % $ 690,000 100 % Variable expenses 99,360 30 % 110,400 80 % 121,440 55 % 331,200 48 % Contribution margin $ 231,840 70 % $ 27,600 20 % $ 99,360 45 % 358,800 52 % Fixed expenses 229,840 Net operating income $ 128,960

Explanation / Answer

White Fragrant Loonzain Total Percentage of total sales 32% 40% 28% 100% Sales 220800 100.00% 276000 100.00% 193200 100.00% 690000 100.00% Variable expenses 66240 30.00% 220800 80.00% 106260 55.00% 393300 57.00% Contribution margin 154560 70.00% 55200 20.00% 86940 45.00% 296700 43.00% Fixed expenses 229840 Net operating income 66860 2 Break-even point in dollar sales=229840/43%= $534512

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