Net operating income: An income is the difference between the revenue and expenses of a company. A net operating income is an income from the usual operations of a company. Target Profit Analysis: It is an analysis of how much unit sales or dollar sales value a company must be attain to realize the target profit estimated by the company. Contribution margin: The difference between the sales revenue and the variable expenses is called a contribution margin. Break-Even Point: A break-even point is the point where a company is neither making profit nor incurring any loss. 1. The contribution format income statement for the month based on the actual sales data. 2. The break-even point in dollar sales based on the actual sales data. 3. Preparation of memorandum.

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Chapter 6, Problem 21P

To determine

Net operating income: An income is the difference between the revenue and expenses of a company. A net operating income is an income from the usual operations of a company.

Target Profit Analysis:It is an analysis of how much unit sales or dollar sales value a company must be attain to realize the target profit estimated by the company.

Contribution margin:The difference between the sales revenue and the variable expenses is called a contribution margin.

Break-Even Point:A break-even point is the point where a company is neither making profit nor incurring any loss.

1. The contribution format income statement for the month based on the actual sales data.

2. The break-even point in dollar sales based on the actual sales data.

3. Preparation of memorandum.

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Gold Star Rice, Limited, of Thailand exports Thai rice throughout Asia. The company grows three varieties of rice—White, Fragrant, and Loonzain. Budgeted sales by product and in total for the coming month are shown below: Dollar sales to break-even = Fixed expenses ÷ CM ratio = $223,600 ÷ 0.52 = $430,000 As shown by these data, net operating income is budgeted at $145,600 for the month and the estimated break-even sales is $430,000. Assume that actual sales for the month total $710,000 as planned; however, actual sales by product are: White, $227,200; Fragrant, $284,000; and Loonzain, $198,800. Required: Prepare a contribution format income statement for the month based on the actual sales data. Compute the break-even point in dollar sales for the month based on your actual data.

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Gold Star Rice, Ltd., of Thailand exports Thai rice throughout Asia. The company grows three varieties of rice—White, Fragrant, and Loonzain. Budgeted sales by product and in total for the coming month are shown below: ProductWhite Fragrant Loonzain TotalPercentage of total sales 48 % 20 % 32 % 100 % Sales $ 350,400 100 % $ 146,000 100 % $ 233,600 100 % $ 730,000 100 %Variable expenses 105,120 30 % 116,800 80 % 128,480 55 % 350,400 48 %Contribution margin $ 245,280 70 % $ 29,200 20 % $ 105,120 45 % 379,600 52 %Fixed expenses 225,680 Net operating income $ 153,920 Dollar sales to break-even = Fixed expenses = $225,680 = $434,000CM ratio 0.52 As shown by these data, net operating income is budgeted at $153,920 for the month and the estimated break-even sales is $434,000. Assume that actual sales for the month total $730,000 as planned. Actual sales by product are: White, $233,600; Fragrant, $292,000; and Loonzain, $204,400. Required: 1. Prepare a contribution format income…