Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is
ID: 2437435 • Letter: J
Question
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 $1,840,000 Selling expenses-variable 440,000 Selling expenses-foxed 320,000 Administrative expenses-variable 350,000 Administrative expenses-fixed 498,000 $50,000 50,000 36,000 54,000 Your answer is correct. Prepare a CVP income statement for 2017 based on management's estimates JORGE COMPANY CVP Income Statement (Estimated) For the Year Ending December 31, 2017 Sales 1840000 Variable Expenses Cost of Goods Sold Selling Expenses Administrative Expenses Total Variable Expenses 1196000 644000 Fixed Expenses Cost of Goods Sold Selling Expenses Administrative Expenses Total Fixed Expenses 602000 Net Income/(Loss) 42000Explanation / Answer
1) Breakeven points 3,440,000 units 2) Breakeven points $ 1,720,000 Sale price per bottle 0.500 Less: Variable cost per bottle 0.325 Contribution margin per bottle 0.175 Fixed cost 602,000 Breakeven In units(Fixed cost/contribution margin per bottle) 3,440,000 =602000/0.175 Breakeven in dollars $ 1,720,000.00 =3440000*0.5 Contribution Margin Ratio =CM/Selling price 35% =0.175/0.5 Margin of Safety Ratio =(Actual Sales-Breakeven point)/Actual Sales 7% =(1840000-1720000)/1840000 Actual Sales 1,840,000 Break even point 1,720,000 Required Dollar Sales 1,905,000 a Income Required 64,750 b Fixed cost 602,000 c=a+b Total 666,750 d Contribution margin per bottle 0.175 e=c/d Required sales in units 3,810,000 =666750/0.175 f Sale price per bottle 0.500 g Required Dollar Sales 1,905,000 =3810000/0.5
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