Problem 3 21 Sales Mix; Multi Product Break Even Analysis (LO3 9)

Gold Star Rice, Ltd., of Thailand exports Thai rice throughout Asia. The company grows three varieties of riceFragrant, 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.