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

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:

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.
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.

Question

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

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:

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.
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.

Quizplus · Accepted Answer

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

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:

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.
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.

Barnes Company Sells Three Products: A,B,and C