The Pottery Barn sells three products: The Basic, The Luxe, and The Ultimate. Budgeted sales and totals for the coming month are as follows:

	The Basic		The Luxe		The Ultimate		Total
% total sales	48%		20%		32%		100%
Sales	$240,000	100%	$100,000	100%	$160,000	100%	$500,000	100%
Variable exp.	72,000	30%	80,000	80%	88,000	55%	240,000	48%
Contribution margin	$168,000	70%	$20,000	20%	$72,000	45%	$260,000	52%
Fixed expense							223,600
Operating income							$36,400
Budgeted break-even sales = $430,000

As shown from the data, the data anticipates earning an operating income of $36,400 and have calculated their break-even sales at $430,000.

Assume that actual sales for the month total $500,000 as planned. The actual sales generated by product are:

	Sales
The Basic	$160,000
The Luxe	200,000
The Ultimate	140,000
Total	$500,000

• Required:
• Prepare a contribution income statement for the month based on actual sales data. Assume that variable expenses are a percentage of sales and total fixed expenses remain the same as the budgeted amounts. Include the percentage amounts for each category in your statement.
• Calculate the break-even sales for the month based on actual data.
• Explain why the company did not meet the budgeted results or break-even in sales even though it met its $500,000 sales budget.

Answer rating: 100% (QA)

Requirement 1 Contribution Income Statement The Basic The Luxe The Ultimate Total Percentage of Tota... View the full answer