Reference no: EM132507951

Barnes Company sells three products: A, B, and C. Budgeted sales by product and in total for the coming month are as follows:

                                         Product A                   Product B

% of total sales                    48%                      20%

Sales                             240,000 100%           $100,000 100%

Variable exp.                 72000 30                       80,000 80

Contribution mar.                168,000 70                    20,000 20

Fixed expense

                                                             PRODUCT C                          Total

% of total sales                                32%                         100%

Sales                                       160,000 100%.            500,000. 100%

Variable exp.                                88,000 55                   240,000. 48

Contribution margin                         72,000 45                     260,000 52

Fixed expense                                                                   223,600

Operating income                                                                36,400

Break-even sales - Budgeted: Fixed Expenses / CM Ratio

= $223,600 / 0.52

$430,000.00

• As shown by these data, operating income is budgeted at $36,400 for the month, and break-even sales at $430,000.

Assume that actual sales for the month total $500,000 as planned.

Actual sales by product are:

A $160,000

B $200,000

C $140,000

Required:

Question a) Prepare a contribution income statement for the month based on actual sales data. Assume variable expenses as a percentage of sales and total fixed expenses are the same as budgeted.

Present the income statement in the format shown in the images above.

Question b) Compute break-even sales for the month, based on actual data.

Question c) Explain why the company did not meet the budgeted operating results or break-even sales even though it met its $500,000 sales budget.