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 $25 $120

Variable expense per unit $15 $42

Number of units sold annually 14,000 7,500

Fixed expenses total $580,000 per year.

Required:

1. 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 (additional) product called Samoan Delight that sells for $50 each and that has variable expenses of $40 per unit. If the company can sell 13,000 units of Samoan Delight without incurring any additional fixed expenses:

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.