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Island Novelties, Incorporated, 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:

Hawaiian Fantasy Tahitian Joy

Selling price per unit $ $12$ $ $120$

Variable expense per unit $ $9$ $ $48$

Number of units sold annually $36,0005,400$

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 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 $$45$ each and that has variable expenses of $$27$ per unit. If the company can sell $12,000$ 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.

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