Solar Products produces two different types of lamps, a floor lamp and a desk lamp....
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Accounting
Solar Products produces two different types of lamps, a floor lamp and a desk lamp. Floor lamps sell for shs. 30, Desk lamps for shs. 20, the projected income statement for the coming year follows:
Sales Shs.600,000
Less: Variable costs; 400,000
Contribution margin 200,000
Less: Fixed expenses 150,000
Net income 50,000
The owner of Solar Products estimates that 60% of the sales revenues will be produced by floor lamps with the remaining 40% by desk lamps. Floor lamps are also responsible for 60% of the variable expenses. Of the fixed expenses, one third is common to both products, and one-half are directly to the floor lamp product line.
Required:
i. Compute the sales revenue that must be earned for Solar Products to reach at break even. Compute the number of floor lamps and desk lamps separately that must be sold for Solar Products to break even.
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