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lucido products markets two computer games: claimjumper and makeover. a contribution format income statement for a recent month for the two games appears below:

claimjumper

makeover

total

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---

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sales

$ 57,600

$ 134,400

$ 192,000

variable expenses

38,400

96,000

134,400

contribution margin

$ 19,200

$ 38,400

57,600

fixed expenses

46,080

net operating income

$ 11,520

required:

1. what is the overall contribution margin (cm) ratio for the company?
2. what is the companys overall break-even point in dollar sales?
3. prepare a contribution format income statement at the companys break-even point that shows the appropriate levels of sales for the two products.

complete this question by entering your answers in the tabs below.
required 1 required 2 required 3
what is the overall contribution margin (cm) ratio for the company?
overall cm ratio ______ %
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Explanation:

Step1: Calculate overall CM ratio

$\text{Overall CM ratio} = \frac{\text{Total Contribution Margin}}{\text{Total Sales}} \times 100\%$
$\text{Overall CM ratio} = \frac{57,600}{192,000} \times 100\% = 30\%$

Step2: Calculate break-even dollar sales

$\text{Break-even sales (dollars)} = \frac{\text{Fixed Expenses}}{\text{Overall CM Ratio}}$
$\text{Break-even sales (dollars)} = \frac{46,080}{0.30} = 153,600$

Step3: Allocate break-even sales to products

First, find sales mix percentages:

• Claimjumper sales mix: $\frac{57,600}{192,000} = 0.30$ or 30%
• Makeover sales mix: $\frac{134,400}{192,000} = 0.70$ or 70%

Allocate break-even sales:

• Claimjumper break-even sales: $153,600 \times 0.30 = 46,080$
• Makeover break-even sales: $153,600 \times 0.70 = 107,520$

Calculate variable expenses for each product at break-even:

• Claimjumper variable expense ratio: $\frac{38,400}{57,600} = \frac{2}{3}$

Claimjumper variable expenses: $46,080 \times \frac{2}{3} = 30,720$

• Makeover variable expense ratio: $\frac{96,000}{134,400} = \frac{5}{7}$

Makeover variable expenses: $107,520 \times \frac{5}{7} = 76,800$

Calculate contribution margin for each product:

• Claimjumper contribution margin: $46,080 - 30,720 = 15,360$
• Makeover contribution margin: $107,520 - 76,800 = 30,720$

Answer:

1. Overall CM ratio: 30%
2. Overall break-even point in dollar sales: $\$153,600$
3. Contribution format income statement at break-even:

	Claimjumper	Makeover	Total
Variable expenses	$\$30,720$	$\$76,800$	$\$107,520$
Contribution margin	$\$15,360$	$\$30,720$	$\$46,080$
Fixed expenses			$\$46,080$
Net operating income			$\$0$