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 2017, management estimates the following revenues and costs.
Sales $1,850,000 Selling expenses—variable $50,000 Direct materials 430,000 Selling expenses—fixed 50,000 Direct labor 330,000 Administrative expenses—variable 32,500 Manufacturing overhead—variable 360,000 Administrative expenses—fixed 60,000 Manufacturing overhead—fixed 418,500

Explanation / Answer

CVP income statement for 2017:($)

Sales 1850000

Less: Variable Cost

Direct Material 430000

Direc Labour 330000

manufacturing Overheads - Variable 360000

Selling expenses—variable 50000

Administrative expenses—variable 32500 1202500

Contribution 647500

Less Fixed Cost

Manufacturing overhead—fixed 418500

Selling expenses—fixed 50000

Administrative expenses—fixed 60000 528500

Net Income 119000

Variable cost per bottle = $1202500 / 3700000 = $.325

Number of bottles sold = 1850000 / .50 = 3700000

Break even point (units) = Fixed Cost / Contribution per unit = 528500 / .325 = 1626154 bottles

Break even point (dollars) = Fixed Cost / Contribution margin ratio = 528500 / (.325*100/.50) = $813077

Contribution margin ratio = Contribution / sales * 100 = .325/.5*100= 65%

Margin of safety ratio = (Actual Sales - Break even sales) / Actual Sales *100 = 1850000 - 813077 / 1850000 * 100 56%

Sales to earn a net Income of $141750: Contribution - Fixed cost = net income

Let x be the numbre of units

.325x - 528500 = 141750

x = 2062308 bottles

Sales in $ = $.50 * 2062308 = $1031154

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