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Lucido Products

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
Sales $30,000 $70,000 $100,000
Less variable expenses 20,000 50,000 70,000
Contribution margin $10,000 $20,000 30,000
Less fixed expenses 24,000
Net operating income $6,000

Required:
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.

Solution Preview

1. Compute the overall contribution margin (CM) ratio for the company
30,000/100,000 = 30%

2. Compute the overall break-even point for the company in sales dollars.
Breakeven point in sales dollars = Total Fixed Cost/Contribution margin ratio
= 24,000/0.30
= $80,000

3. Verify the overall break-even point for the company by constructing a ...

Solution Summary

This solution is comprised of a detailed explanation to compute the overall contribution margin (CM) ratio for the company, the overall break-even point for the company in sales dollars, and 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.

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