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Finch Company produces two products. Budgeted annual income statements for the two products are provided...

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Accounting

Finch Company produces two products. Budgeted annual income statements for the two products are provided as follows.

Power Lite Total
Budgeted Per Budgeted Budgeted Per Budgeted Budgeted Budgeted
Number Unit Amount Number Unit Amount Number Amount
Sales 300 @ $ 580 = $ 174,000 700 @ $ 530 = $ 371,000 1,000 $ 545,000
Variable cost 300 @ 320 = (96,000 ) 700 @ 410 = (287,000 ) 1,000 (383,000 )
Contribution margin 300 @ 260 = 78,000 700 @ 120 = 84,000 1,000 162,000
Fixed cost (14,000 ) (75,100 ) (89,100 )
Net income $ 64,000 $ 8,900 $ 72,900

Required:

  1. Verify the break-even point by preparing an income statement for each product as well as an income statement for the combined products.

  2. Determine the margin of safety based on the combined sales of the two products.

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