Problem $6-27$ Sales Mix; Break$-$Even Analysis; Margin of Safety $[$LO$6-7,$ LO$6-9]$

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:

$\backslash$table$[[,\backslash$table$[[$Hawaiian$],[$Fantasy$]],\backslash$table$[[$Tahitian$],[$Joy$]]],[$Selling price per unit,$20,150],[$Variable expense per unit,,$30],[$Number of units sold annually,$37,000,7,400]]$

Fixed expenses total $$912,000$ per year.

Required:

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 tiollar sales. Also, compute its margin of safety in dollars and its margin of safety percentage.

The company has developed a new product called Samoan Delight that sells for $$40$ each and that has variable expenses of $$32$ per unit. If the company can sell $22,500$ 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.