Smithen Company, a wholesale distributor, has been operating for only a few months. The company sells three

Question:

Smithen Company, a wholesale distributor, has been operating for only a few months. The company sells three products€”sinks, mirrors, and vanities. Budgeted sales by product and in total for the coming month are shown below based on planned unit sales as follows:

Units 1000 Percentage 50% 25% 25% 100% Sinks Mirors Vanities Total 500 500 2,000 Product Sinks Vanities Total Mirrors Pe

Break-even point in sales dollars = Fixed expenses = $223,600 = $430,000
Overall CM ratio 0.52
Break-even point in unit sales:
Total Fixed expenses= $223,600 = 1,720 units
Weighted-average CM per unit $130*
*($168 Ã— 0.50) + ($40 Ã— 0.25) + ($144 Ã— 0.25)
As shown by these data, operating income is budgeted at $36,400 for the month, break-even sales dollars at $430,000, and break-even unit sales at 1,720. Assume that actual sales for the month total $504,000 (2,100 units), with the CM ratio and per unit amounts the same as budgeted. Actual fixed expenses are the same as budgeted, $223,600. Actual sales by product are as follows: sinks, $126,000 (525 units); mirrors, $210,000 (1,050 units); and vanities, $168,000 (525 units).
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 the actual data.
3. Calculate the break-even point in unit sales for the month, based on the actual data.
4. Considering the fact that the company exceeded 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.