PROBLEM 4-27 Sal Island Novelties, ne, of Palau make wtlavaian Fanasy nd Tahtandoy, Present revenue, cost, and saley data for the two produets followe les Mix, Break Even Analysis Margin of Safety L07 Lo9 eantaS Selling price perunit. . . Ii... Variable expenses per unit Number of units sold annually. . . . . . . . $15 $100 $20 20,000 5,000 $9 Fixed expenses total $475,800 per year Required 1. Assuming the sales mix given above, do the following: Prepare a contribution format income statement showing both dollar and percent col a. umns for each product and for the company as a whole b. Compute the break-even point in dollar sales for the company as a whole and the margin of safety in both dollars and percent. The company has developed a new product to be called Samoan Delight. Assume that the company could sell 10,000 units at $45 each. The variable expenses would be $36 each. The company's fixed expenses would not change. a. Prepare another contribution format income statement, including sales of the Samoan 2. Delight (sales of the other two products would not change) b. Compute the company's new break-even point in dollar sales and the new margin of safety in both dollars and percent. 3. The president of the company examines your figures and says, There's something strange here. Our fixed expenses haven't changed and you show greater total contribution margin if we add the new product, but you also show our break-even point going up. With greater contribution margin, the break-even point should go down, not up. You've made a mistake somewhere." Explain to the president what has happened