P5-2A Lorge Company bottles and distributes Livit, a diet soft drink. The bevera
ID: 2344662 • Letter: P
Question
P5-2ALorge Company bottles and distributes Livit, 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 2011, management estimates the following revenues and costs.
Net sales $1,800,000 Selling expenses-variable $70,000
Direct materials 430,000 Selling expenses-fixed 65,000
Direct labor 352,000 Administrative expenses-variable 20,000
Manufacturing overhead-variable 316,000 Administrative expenses-fixed 60,000
Manufacturing overhead-fixed 283,000
Prepare a CVP income statement for 2011 based on management's estimates. (List amounts from largest to smallest e.g. 10, 5, 3, 2. Enter all amounts as positive amounts and subtract where necessary.)
Explanation / Answer
Net Sales 1,800,000 Less: Variable Expenses Direct materials 430,000 Direct labor 352,000 Var Man O/H 316,000 Var selling exp 70,000 Var admin exp 20,000 Total variable exp 1,188,000 Contribution Margin 612,000 Less: fixed expenses Manufacturing O/H 283,000 Selling expenses 65,000 Admin expenses 60,000 Total fixed expenses 408,000 Net income 204,000
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