Island Novelties, Inc., of Palau makes two productsHawaiian 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	$	20		$	125
Variable expense per unit	$	13		$	50
Number of units sold annually		15,000			5,100

Fixed expenses total $325,000 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 12,500 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 companys revised break-even point in dollar sales. Also, compute its revised margin of safety in dollars and margin of safety percentage.