Just need help with: - Variable Cost/bottle - Break Even points: in dollars and
ID: 2339955 • Letter: J
Question
Just need help with:
- Variable Cost/bottle
- Break Even points: in dollars and units
- Margin Safety Ratio
Problem 19-2A Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 75 cents per bottle. For the year 2017, management estimates the following revenues and costs. Sales Direct materials Direct labor Manufacturing overhead-variable Manufacturing overhead-fixed 50,000 55,000 49,000 52,000 $1,870,000 Selling expenses-variable 400,000 Selling expenses-fixed 360,000 Administrative expenses-variable 50,000 Administrative expenses-fixed 304,000Explanation / Answer
Answer b.
Sales = $1,870,000
Selling price per bottle = $0.75
Number of bottles sold = Sales / Selling price per bottle
Number of bottles sold = $1,870,000 / $0.75
Number of bottles sold = 2,493,333
Variable cost per bottle = Variable expenses / Number of bottles sold
Variable cost per bottle = $1,309,000 / 2,493,333
Variable cost per bottle = $0.525
Answer c.
Contribution margin per bottle = Selling price per bottle - Variable cost per bottle
Contribution margin per bottle = $0.750 - $0.525
Contribution margin per bottle = $0.225
Breakeven Point in bottle sales = Fixed expenses / Contribution margin per bottle
Breakeven Point in bottle sales = $411,000 / $0.225
Breakeven Point in bottle sales = 1,826,667
Breakeven Point in dollar sales = Fixed expenses / Contribution margin ratio
Breakeven Point in dollar sales = $411,000 / 0.30
Breakeven Point in dollar sales = $1,370,000
Answer d.
Margin of safety ratio = (Sales - Breakeven Point in dollar sales) / Sales
Margin of safety ratio = ($1,870,000 - $1,370,000) / $1,870,000
Margin of safety ratio = 27%
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