Problem: Sales Mix; Multi Product Break Even Analysis
Gold Star Rice, Ltd., of Thailand exports Thai rice throughout Asia. The company grows three varieties of rice-Fragrant, White, and Loonzain. (The currency in Thailand is the baht, which is denoted by B.) Budgeted sales by product and in total for the coming month are shown below:
|
Product
|
|
White
|
Fragrant
|
Loonzain
|
Total
|
|
% of total sales
|
20%
|
|
52%
|
|
28%
|
|
100%
|
|
|
Sales
|
$ 15,000
|
100%
|
$390,000
|
100%
|
$210,000
|
100%
|
$750,000
|
100%
|
|
Var. Expenses (-)
|
108,000
|
72%
|
78,000
|
20%
|
84,000
|
40%
|
270,000
|
36%
|
|
Con. Margin
|
$ 42,000
|
28%
|
$312,000
|
80%
|
$126,000
|
60%
|
480,000
|
64%
|
|
Fix. Expenses
|
|
|
|
|
|
|
449,280
|
|
|
NOI
|
|
|
|
|
|
|
$30,720
|
|
Dollar sales to break even= fixed expenses/ CM ratio= 449,280/0.64=$702, 000
As shown by these data, net operating income is budgeted at $30,720 for the month and Break-even sales at $702,000.
Assume that actual sales for the month total $750,000 as planned. Actual sales by Product are: White, $300,000; Fragrant, $180,000; and Loonzain, $270,000.
Required:
Prepare a contribution format income statement for the month based on actual sales Data. Present the income statement in the format shown above.
Compute the break-even point in dollar sales for the month, based on your actual data. Considering the fact that the company met its $750,000 sales budget for the month.
The president is shocked at the results shown on your income statement in requirement 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.