Barnes Company Sells Three Products-A,B,andC

Barnes Company sells three products-A,B,andC.Budgeted sales by product and in total for the coming month are as follows:
Break-even sales-Budgeted: Fixed Expenses = $223,600 = $430,000
CM Ratio 0.52
As shown by these data,net 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;and C,$140,000.
Required:
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 above.
b.Compute break-even sales for the month,based on actual data.
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.
a.
b.Break-even sales:
Fixed Expenses = $223,600 = $520,000
CM Ratio 0.43
c.Despite the fact that the Company met its sales budget of $500,000 for the month,the mix of products sold changed from that budgeted.This is the reason the budgeted net income was not met,and the reason the break-even sales were greater than budgeted.The company's sales mix was planned at 48% A,20% B,and 32%C.The actual sales mix was 32% A,40% B,and only 28%C.The budgeted contribution margin was 52%,while the actual contribution margin was 43%.This also explains why the break-even point was higher than planned.With less average contribution margin per dollar of sales,a greater level of sales is required to provide sufficient contribution margin to cover fixed costs.