Reference no: EM132611453

Gold Star Rice, Ltd., of Thailand exports Thai rice throughout Asia. The company grows three varieties of rice-Fragrant, White, and Loonzain. Budgeted sales by product and in total for the coming month are shown below:

                                                                                                                                Product

                                                                         White                         Fragrant                              Loonzain                     Total

Percentage of total sales                           20%                         52%                                  28%                   100%

Sales . . . . . . . . . . . . . . . . . . . . . $150,000 100%                $390,000 100%                  $210,000 100%      $750,000 100%

Variable expenses . . . . . . . . . . .        108,000 72 %                   78,000 20 %                     84,000 40 %         270,000 36 %

Contribution margin . . . . . . . . . .        $ 42,000 28 %                     $312,000 80 %                $126,000 60 %      480,000 64 %

Fixed expenses . . . . . . . . . . . . .      449,280

Net operating income . . . . . . . . .        $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 breakeven 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:

Question 1. Make a contribution format income statement for the month based on actual sales data. Present the income statement in the format shown above.

Question 2. Compute the break-even point in dollar sales for the month based on your actual data.

Question 3. 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 (1) above. Make a brief memo for the president explaining why both the operating results and the break-even point in dollar sales are different from what was budgeted.