Question

In: Accounting

Watt Company produces two products. Budgeted annual income statements for the two products are provided here:...

Watt Company produces two products. Budgeted annual income statements for the two products are provided here:

Power Lite Total
Budgeted Per Budgeted Budgeted Per Budgeted Budgeted Budgeted
Number Unit Amount Number Unit Amount Number Amount
  Sales 200     @ $ 500 = $ 100,000 800     @ $ 560 = $ 448,000 1,000     $ 548,000
  Variable cost 200     @ 290 = (58,000 ) 800     @ 380 = (304,000 ) 1,000     (362,000 )
  Contribution margin 200     @ 210 = 42,000 800     @ 180 = 144,000 1,000     186,000
  Fixed cost (12,000 ) (99,600 ) (111,600 )
  Net income $ 30,000 $ 44,400 $ 74,400

a

a)
Power Lite Total
Sales
Variable costs
Contribution margin
Fixed cost
Net income (Loss)

b) verify the margin of safety

Margin of safety %

Solutions

Expert Solution

Power Lite Total
Sales $     100,000 $     448,000 $        548,000
Variable costs $       58,000 $     304,000 $        362,000
Contribution margin $       42,000 $     144,000 $        186,000
Fixed cost $       12,000 $       99,600 $        111,600
Net income (Loss) $       30,000 $       44,400 $          74,400
Margin of safety %= (sales- break even point)/Sales
Break even point=fixed cost/ contribution margin per unit
Power Lite Total
Break even point (units)                57.14              553.33
Break even point (dollar sales) $    28,571.43 $ 309,866.67 $ 338,438.10
Margin of safety 71.43% 30.83% 38.24%

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