Compute the Break=Even Point for a Multiproduct Company
Lucky Products markets two computer games: Predator and Runway. A contribution format income statement for a recent month for the two games appears below:
Predator Runway Total
Sales $100,000 $50,000 $150,000
Variable expenses 25,000 5,000 30,000
Contribution margin $75,000 $45,000 $120,000
Fixed expenses 90,000
Net operating income $30,000
1. Compute the overall contribution margin (CM) ratio for the company.
2. Compute the overall break-even point for the company in sales dollars.
3. Verify the overall break-even point for the company by constructing a contribution format income statement showing the appropriate levels of sales for the two products.