Speedy Socks, a small company based in Kingston, manufactures and sells two types of socks for runners: Ankle and Knee. Current revenue, cost, and unit sales data for the two products appear below:
Selling price per pair	$10.00		$15.00
Variable expenses per pair	$2.50		$6.00
Number of pairs sold monthly	1,200	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. Compute the break-even point in dollars and in units for the company as a whole. How much of these sales and unit totals pertain to each individual product.
c. Compute the company's margin of safety in dollars.
d. Compute how many pairs of socks must be sold overall if the company wants to make an after-tax target profit of $10,500 per month and the tax rate is 30%. Assume that the sales mix remains the same as shown above.
2. The company has developed another type of sock that provides better grip indoors, called the Yoga sock, 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. The variable expense would be $18.40 per pair. The companys fixed expenses would not change. Sales of the other two products would not change.
a. Compute the companys new break-even point in dollars and in units for the company as a whole.
3. The president of the company is puzzled by your analysis. She does not understand why the break-even point has gone up even though there has been no increase in fixed costs and the addition of the Yoga sock sells at the highest price of the three products. Explain to the president what happened.