Marlin Company, a wholesale distributor, has been operating for only a few months. The company sells three products (sinks, mirrors, and vanities). Budgeted sales by product and in total for the coming month are shown below: Product sinks mirrors vanities total Percentage of total sales 48% 20% 32% 100% sales 240000$ 100% 100000$ 100% 160000$ 100% 500000$ 100% Variable expenses 72000$ 30% 20000$ 80% 88000$ 55% 240000$ 48% Contribution margin . 168000$ 70% 80000$ 20% 72000$ 45% 260000$ 52% Fixed expenses 223600$ Net operating income 36400$ Dollar sales to break-even = Fixed expenses /CM ratio = $223,600 / 0.52 = $430,000 As shown by these data, net operating income is budgeted at $36,400 for the month, and break-even sales at $430,000. Assume that actual sales for the month total $500,000 as planned. Actual sales by product are: sinks, $160,000; mirrors, $200,000; and vanities, $140,000. Required: 1. Prepare a contribution format income statement for the month based on actual sales data. Present the income statement in the format shown above. 2. Compute the break-even point in sales dollars for the month, based on your actual data. 3. Considering the fact that the company met its $500,000 sales budget for the month, the president is shocked at the results shown on your income statement in (1) above. Prepare a brief memo for the president explaining why both the operating results and the break-even point in sales dollars are different from what was budgeted.
Marlin Company, a wholesale distributor, has been operating for only a few months. The company sells three products (sinks, mirrors, and vanities). Budgeted sales by product and in total for the
coming month are shown below:
Product
| sinks | mirrors | vanities | total | ||||||
| Percentage of total sales | 48% | 20% | 32% | 100% | |||||
| sales | 240000$ | 100% | 100000$ | 100% | 160000$ | 100% | 500000$ | 100% | |
| Variable expenses | 72000$ | 30% | 20000$ | 80% | 88000$ | 55% | 240000$ | 48% | |
| Contribution margin . | 168000$ | 70% | 80000$ | 20% | 72000$ | 45% | 260000$ | 52% | |
| Fixed expenses | 223600$ | ||||||||
| Net operating income | 36400$ |
Dollar sales to break-even =
Fixed expenses /CM ratio =
$223,600 / 0.52 = $430,000
As shown by these data, net operating income is budgeted at $36,400 for the month, and break-even sales at $430,000.
Assume that actual sales for the month total $500,000 as planned. Actual sales by product are:
sinks, $160,000; mirrors, $200,000; and vanities, $140,000.
Required:
1. Prepare a contribution format income statement for the month based on actual sales data.
Present the income statement in the format shown above.
2. Compute the break-even point in sales dollars for the month, based on your actual data.
3. Considering the fact that the company met its $500,000 sales budget for the month, the president is shocked at the results shown on your income statement in (1) above. Prepare a brief memo for the president explaining why both the operating results and the break-even point in
sales dollars are different from what was budgeted.
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