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 Fragrant Loonzain Total Percentage of total sales 48 % 20 % 32 % 100 % Sales $ 307,200 100 % $ 128,000 100 % $ 204,800 100 % $ 640,000 100 % Variable expenses 92,160 30 % 102,400 80 % 112,640 55 % 307,200 48 % Contribution margin $ 215,040 70 % $ 25,600 20 % $ 92,160 45 % 332,800 52 % Fixed expenses 227,760 Net operating income $ 105,040 Dollar sales to break-even = Fixed expenses = $227,760 = $438,000 CM ratio 0.52 As shown by these data, net operating income is budgeted at $105,040 for the month and the estimated break-even sales is $438,000. Assume that actual sales for the month total $640,000 as planned; however, actual sales by product are: White, $204,800; Fragrant, $256,000; and Loonzain, $179,200. 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.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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 | Fragrant | Loonzain | Total | |||||||||||||||||
| Percentage of total sales | 48 | % | 20 | % | 32 | % | 100 | % | ||||||||||||
| Sales | $ | 307,200 | 100 | % | $ | 128,000 | 100 | % | $ | 204,800 | 100 | % | $ | 640,000 | 100 | % | ||||
| Variable expenses | 92,160 | 30 | % | 102,400 | 80 | % | 112,640 | 55 | % | 307,200 | 48 | % | ||||||||
| Contribution margin | $ | 215,040 | 70 | % | $ | 25,600 | 20 | % | $ | 92,160 | 45 | % | 332,800 | 52 | % | |||||
| Fixed expenses | 227,760 | |||||||||||||||||||
| Net operating income | $ | 105,040 | ||||||||||||||||||
| Dollar sales to break-even | = | Fixed expenses | = | $227,760 | = $438,000 |
| CM ratio | 0.52 |
As shown by these data, net operating income is budgeted at $105,040 for the month and the estimated break-even sales is $438,000.
Assume that actual sales for the month total $640,000 as planned; however, actual sales by product are: White, $204,800; Fragrant, $256,000; and Loonzain, $179,200.
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.
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