Problem: Marlin Company Sales Mix; Multiproduct Break-Even Analysis (LO 3-9)
1. Marlin Company, a wholesale distributor, has been operating for only a few months. The company sells three products - sinks, mirrors, vanities. Budgeted sales by product and in total for the coming month are shown below:
Product
Sinks Mirrors Vanities Total
Percentage of sales......... 48% 20% 32%
Sales.................................. $ 240,000 100% $100, 000 10% $160, 000 100% $500, 000 100%
Variable expenses.......... 72,000 30% 80, 000 80% 88, 000 55% 240, 000 48%
Contribution Margin..... $ 168,000 70% $ 20,000 20% $ 72,000 45% 260, 000 52%
Fixed expenses............... 223, 600
Net operating income.... $ 36, 400
Dollar sales to break-even = Fixed Expenses/CM ration = $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 at $430,000.
Assume that actual sales for month total $ 500,000 as planned. Actual sales by products are:
Sink, $160,000; Mirror, $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.