Reference no: EM132618883

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:

Problem 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.