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Warm Hands, a small company based in Prince Edward Island, manufactures and sells two types of lightweight gloves for runnersWarm and Cozy. Current revenue, cost,
Warm Hands, a small company based in Prince Edward Island, manufactures and sells two types of lightweight gloves for runnersWarm and Cozy. Current revenue, cost, and unit sales data for the two products appear below: Selling price per pair Variable expenses per pair Number of pairs sold monthly Warm $ 9.00 $ 2.25 600 units Cozy $13.50 $ 6.75 200 units Fixed expenses are $3,510 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. (Round percentage answers to 2 decimal places.) WARM HANDS Contribution Income Statement Warm Cozy Total % % % Sales $ 5,400 $ 2,700 $ 8,100 Variable expenses 1,350 1,350 2,700 Contribution margin $ 4,050 0.00 $ 1,350 0.00 5,400 0.00 Fixed expenses 3,510 Operating income $ 1,890 b. Compute the break-even point in dollars for the company as a whole and the margin of safety in both dollars and percentage of sales. (Do not round your intermediate calculations. Round percentage answer to 2 decimal places.) Break-even sales dollars $ 5,265 E 2,835 Margin of safety in dollars Margin of safety in percentage 35.00% c. Compute the break-even point in units for the company as a whole and the margin of safety in both units (pairs of gloves) and percentage of sales. (Round percentage answer to 2 decimal places.) Break-even units Margin of safety in units Margin of safety in percentage % d. Compute how many pairs of gloves must be sold overall if the company wants to make an after-tax target profit of $14,175 and the tax rate is 30%. Assume that the sales mix remains the same as shown above. Sales in units
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