Island Novelties, Inc., of Palau makes two products-Hawaiian Fantasy and Tahitian Joy. Each product's selling price, variable expense per unit, and annual sales volume are as follows: Selling price per unit Variable expense per unit Number of units sold annually. Hawaiian Fantasy 20 9 22,000 $ $ Tahitian Joy $ $ 110 33 6,000 Fixed expenses total $664,000 per year. Required: 1. Assuming the sales mix given above, do the following: a. Prepare a contribution format income statement showing both dollar and percent columns for each product and for the company as a whole. b. Compute the company's break-even point in dollar sales. Also, compute its margin of safety in dollars and its margin of safety percentage. 2. The company has developed a new product called Samoan Delight that sells for $30 each and that has variable expenses of $24 per unit. If the company can sell 22,000 units of Samoan Delight without incurring any additional fixed expenses: a. Prepare a revised contribution format income statement that includes Samoan Delight. Assume that sales of the other two products does not change. b. Compute the company's revised break-even point in dollar sales. Also, compute its revised margin of safety in dollars and margin of safety percentage.
Island Novelties, Inc., of Palau makes two products-Hawaiian Fantasy and Tahitian Joy. Each product's selling price, variable expense per unit, and annual sales volume are as follows: Selling price per unit Variable expense per unit Number of units sold annually. Hawaiian Fantasy 20 9 22,000 $ $ Tahitian Joy $ $ 110 33 6,000 Fixed expenses total $664,000 per year. Required: 1. Assuming the sales mix given above, do the following: a. Prepare a contribution format income statement showing both dollar and percent columns for each product and for the company as a whole. b. Compute the company's break-even point in dollar sales. Also, compute its margin of safety in dollars and its margin of safety percentage. 2. The company has developed a new product called Samoan Delight that sells for $30 each and that has variable expenses of $24 per unit. If the company can sell 22,000 units of Samoan Delight without incurring any additional fixed expenses: a. Prepare a revised contribution format income statement that includes Samoan Delight. Assume that sales of the other two products does not change. b. Compute the company's revised break-even point in dollar sales. Also, compute its revised margin of safety in dollars and margin of safety percentage.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Island Novelties, Inc., of Palau makes two products-Hawaiian Fantasy and Tahitian Joy. Each product's selling price, variable expense
per unit, and annual sales volume are as follows:
Selling price per unit
Variable expense per unit
Number of units sold annually
Hawaiian
Fantasy
20
9
22,000
$
$
Tahitian
Joy
$
$
110
33
6,000
Fixed expenses total $664,000 per year.
Required:
1. Assuming the sales mix given above, do the following:
a. Prepare a contribution format income statement showing both dollar and percent columns for each product and for the company as
a whole.
b. Compute the company's break-even point in dollar sales. Also, compute its margin of safety in dollars and its margin of safety
percentage.
2. The company has developed a new product called Samoan Delight that sells for $30 each and that has variable expenses of $24
per unit. If the company can sell 22,000 units of Samoan Delight without incurring any additional fixed expenses:
a. Prepare a revised contribution format income statement that includes Samoan Delight. Assume that sales of the other two products
does not change.
b. Compute the company's revised break-even point in dollar sales. Also, compute its revised margin of safety in dollars and margin of
safety percentage.
Transcribed Image Text:Complete this question by entering your answers in the tabs below.
Req 1A
Req 1B
Req 2A
Break-even point in dollar sales
Margin of safety in dollars
Margin of safety percentage
Assuming the sales mix given above, compute the company's break-even point in dollar sales. Also, compute its margin of
safety in dollars and its margin of safety percentage. (Do not round your intermediate calculations. Round your "Margin of
safety percentage" final answer to 1 decimal place (i.e 0.1234 should be entered as 12.3). Round your other final answers to
the nearest whole dollar.)
Req 2B
%
< Req 1A
Req 2A >
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