Q4 - 15 marks

Cosy and Warm, a small Winnipeg-based company, manufactures and sells two types of lightweight gloves for runnersCozy and Warm. Current revenue, cost, and unit sales data for the two products appear below:

Cosy

Warm

Selling price per pair

$ 10.00

$ 15.00

Variable expenses per pair

$ 2.50

$ 7.50

Number of pairs sold monthly

1200

units

400

units

Fixed expenses are $2,070 per month.

Required:

1.Assuming the sales mix above, do the following:

a.Prepare a contribution format income statement showing both dollars and percentage columns for each product and for the company as a whole.

b. For the company as a whole, compute the break-even point in sales dollars and the margin of safety in both dollars and percentage of sales.

c.For the company as a whole, compute the break-even point in units and the margin of safety in both units (pairs of gloves) and percentage of sales.

2.The company has developed another type of gloves that provide better protection in extreme cold, Toasty, which the company plans to sell for $23.00 per pair.

At this price, the company expects to sell 400 pairs per month of the product, with no change to sales of the other two products or total fixed exp for the company. The variable expense would be $18.40 per pair.

For the company as a whole, compute the company's new break-even point in sales dollars and the new margin of safety in both dollars and percentage of sales.