Question

Island Novelties, Inc., of Palau makes two products, Hawaiian Fantasy and Tahitian Joy. Present revenue, cost,...

Island Novelties, Inc., of Palau makes two products, Hawaiian Fantasy and Tahitian Joy. Present revenue, cost, and sales data for the two products follow:

Hawaiian Fantasy Tahitian Joy
Selling price per unit $ 12 $ 120
Variable expenses per unit $ 9 $ 48
Number of units sold annually 36,000 5,400

Fixed expenses total $437,000 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 break-even point in dollar sales for the company as a whole and the margin of safety in both dollars and percent. Round your "Margin of safety percentage" to 1 decimal place (i.e .1234 should be entered as 12.3).

2. The company has developed a new product to be called Samoan Delight. Assume that the company could sell 12,000 units at $45 each. The variable expenses would be $27 each. The company’s fixed expenses would not change.

a. Prepare another contribution format income statement, including sales of the Samoan Delight (sales of the other two products would not change). Round your "Percentage" answers to 1 decimal place (i.e .1234 should be entered as 12.3).

b. Compute the company’s new break-even point in dollar sales and the new margin of safety in both dollars and percent. Round your dollar amounts to nearest whole number. Round your "Percentage" answer to 1 decimal place (i.e .1234 should be entered as 12.3).

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Shannon Company segments its income statement into its North and South Divisions. The company’s overall sales,...
Shannon Company segments its income statement into its North and South Divisions. The company’s overall sales, contribution margin ratio, and net operating income are $380,000, 34%, and $7,600, respectively. The North Division’s contribution margin and contribution margin ratio are $83,600 and 38%, respectively. The South Division’s segment margin is $19,200. The company has $45,600 of common fixed expenses that cannot be traced to either division. Required: Prepare an income statement for Shannon Company that uses the contribution format and is...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31   Assets   Current assets:      Cash $ 19,000      Accounts receivable, net 190,000      Merchandise inventory 390,000      Prepaid expenses 8,000   Total current assets 607,000   Property and equipment, net 870,000   Total assets $ 1,477,000   Liabilities and Stockholders' Equity   Liabilities:      Current liabilities $ 240,000      Bonds payable, 9% 380,000   Total liabilities 620,000   Stockholders’ equity:      Common stock, $10 par value $ 140,000      Retained earnings 717,000   Total stockholders’ equity 857,000   Total liabilities...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31   Assets   Current assets:      Cash $ 20,000      Accounts receivable, net 170,000      Merchandise inventory 370,000      Prepaid expenses 8,000   Total current assets 568,000   Property and equipment, net 890,000   Total assets $ 1,458,000   Liabilities and Stockholders' Equity   Liabilities:      Current liabilities $ 260,000      Bonds payable, 9% 340,000   Total liabilities 600,000   Stockholders’ equity:      Common stock, $5 par value $ 180,000      Retained earnings 678,000   Total stockholders’ equity 858,000   Total liabilities...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31   Assets   Current assets:      Cash $ 24,000      Accounts receivable, net 170,000      Merchandise inventory 310,000      Prepaid expenses 7,000   Total current assets 511,000   Property and equipment, net 900,000   Total assets $ 1,411,000   Liabilities and Stockholders' Equity   Liabilities:      Current liabilities $ 280,000      Bonds payable, 11% 340,000   Total liabilities 620,000   Stockholders’ equity:      Common stock, $10 par value $ 170,000      Retained earnings 621,000   Total stockholders’ equity 791,000   Total liabilities...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31   Assets   Current assets:      Cash $ 19,000      Accounts receivable, net 220,000      Merchandise inventory 330,000      Prepaid expenses 8,000   Total current assets 577,000   Property and equipment, net 850,000   Total assets $ 1,427,000   Liabilities and Stockholders' Equity   Liabilities:      Current liabilities $ 270,000      Bonds payable, 12% 390,000   Total liabilities 660,000   Stockholders’ equity:      Common stock, $5 par value $ 140,000      Retained earnings 627,000   Total stockholders’ equity 767,000   Total liabilities...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December...
The financial statements for Castile Products, Inc., are given below: Castile Products, Inc. Balance Sheet December 31   Assets   Current assets:      Cash $ 22,000      Accounts receivable, net 230,000      Merchandise inventory 370,000      Prepaid expenses 10,000   Total current assets 632,000   Property and equipment, net 860,000   Total assets $ 1,492,000   Liabilities and Stockholders' Equity   Liabilities:      Current liabilities $ 280,000      Bonds payable, 8% 400,000   Total liabilities 680,000   Stockholders’ equity:      Common stock, $10 par value $ 180,000      Retained earnings 632,000   Total stockholders’ equity 812,000   Total liabilities...
Exercise 6-7 Segmented Income Statement [LO6-4] Shannon Company segments its income statement into its North and...
Exercise 6-7 Segmented Income Statement [LO6-4] Shannon Company segments its income statement into its North and South Divisions. The company’s overall sales, contribution margin ratio, and net operating income are $490,000, 38%, and $9,800, respectively. The North Division’s contribution margin and contribution margin ratio are $100,800 and 42%, respectively. The South Division’s segment margin is $35,000. The company has $68,600 of common fixed expenses that cannot be traced to either division. Required: Prepare an income statement for Shannon Company that...
Exercise 6-7 Segmented Income Statement [LO6-4] Shannon Company segments its income statement into its North and...
Exercise 6-7 Segmented Income Statement [LO6-4] Shannon Company segments its income statement into its North and South Divisions. The company’s overall sales, contribution margin ratio, and net operating income are $660,000, 42%, and $13,200, respectively. The North Division’s contribution margin and contribution margin ratio are $119,600 and 46%, respectively. The South Division’s segment margin is $64,000. The company has $105,600 of common fixed expenses that cannot be traced to either division. Required: Prepare an income statement for Shannon Company that...
Problem 6-21A Segment Reporting and Decision Making [LO6-4] Vulcan Company’s contribution format income statement for June...
Problem 6-21A Segment Reporting and Decision Making [LO6-4] Vulcan Company’s contribution format income statement for June is given below:    Vulcan Company Income Statement For the Month Ended June 30   Sales $ 850,000   Variable expenses 308,000   Contribution margin 542,000   Fixed expenses 490,000   Net operating income $ 52,000    Management is disappointed with the company’s performance and is wondering what can be done to improve profits. By examining sales and cost records, you have determined the following:    a. The company...
Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000...
Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units): Sales $ 24,200 Variable expenses 13,400 Contribution margin 10,800 Fixed expenses 7,668 Net operating income $ 3,132 1. What is the margin of safety in dollars? (Do not round intermediate calculations.) 2. What is the margin of safety percentage? (Round your final answers to the nearest whole percentage (i.e, .12 should be...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT