Finch Company produces two products. Budgeted annual income statements for the two products are provided...
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Accounting
Finch Company produces two products. Budgeted annual income statements for the two products are provided as follows.
| Power | Lite | Total | ||||||||||||||||||||||
| Budgeted | Per | Budgeted | Budgeted | Per | Budgeted | Budgeted | Budgeted | |||||||||||||||||
| Number | Unit | Amount | Number | Unit | Amount | Number | Amount | |||||||||||||||||
| Sales | 300 | @ | $ | 580 | = | $ | 174,000 | 700 | @ | $ | 530 | = | $ | 371,000 | 1,000 | $ | 545,000 | |||||||
| Variable cost | 300 | @ | 320 | = | (96,000 | ) | 700 | @ | 410 | = | (287,000 | ) | 1,000 | (383,000 | ) | |||||||||
| Contribution margin | 300 | @ | 260 | = | 78,000 | 700 | @ | 120 | = | 84,000 | 1,000 | 162,000 | ||||||||||||
| Fixed cost | (14,000 | ) | (75,100 | ) | (89,100 | ) | ||||||||||||||||||
| Net income | $ | 64,000 | $ | 8,900 | $ | 72,900 | ||||||||||||||||||
Required:
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Verify the break-even point by preparing an income statement for each product as well as an income statement for the combined products.
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Determine the margin of safety based on the combined sales of the two products.
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