Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is

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 2014, management estimates the following revenues and costs. Prepare a CVP income statement for 2014 based on management's estimates. Compute the break-even point in (1) units and (2) dollars. Compute the contribution margin ratio and the margin of safety ratio. Determine the sales dollars required to earn net income of $180,000.

Explanation / Answer

Particulars Amount Sales 1800000 Variable expense: Cost of goods sold 1170000 Seeling expense 70000 Administrative 20000 Total variable 1260000 Contribution (sales - varibale) 540000 Fixed expenses: Cost of goods sold fixed 280000 fixed selling 65000 Fixed administrative 60000 Total fixed 405000 Net income/Loss 135000 Break even points in units Fixed cost/Contribution per unit Volume 3600000 Contribution per unit 0.15 Break even points in units 2700000 Break even points in dollars Fixed cost /PV ratio PV ratio contribution/sales *100 15 Break even points in dollars 27000 Contribution margin ratio Contribution /Total sales Contribution margin ratio 0.3 Margin of safety ratio total sales - break even sales 900000 Sales in dollars to earn 180000 (Fixed +180000)/pv ratio Sales dollars 39000

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