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.

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: Unite Percentage Sink 1,000 Mimon 500 Vanities 500 Tote 2,000 100% Page 126 Product Sinks Micron Vanities Total Percentage of total sales 10% 100% Sale: $ 240,000 100 $100,000 100 $160,000 100 $500,000 1002 Variable expensea 72,000 240 000 Contribution margin $163,000 3 20,000 $ 72,000 45% 260,000 Contribution margin per unit 5 163 40 144 Fixed expendca 213 600 Operating income 5 36,400 Break-even point in sales dollars = Fixed expenses Overall CM ratio = $223,600 0 .52 =$430,000 Break-even point in unit sales: Total fixed expenses Weighted-average CM per unit = $223,600 $130* = 1,720 units *($ 168 x 0.50) + ($ 40 % 0.25 ) + ( $ 144 * 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, $213,600. Actual sales by product are as follows: sinks, $126,000 (525 units); mirrors, $210,000 (1,050 units); and vanities, $168,000 (525 unit:)