JORGE COMPANY CVP Income Statement (Estimated) For the Year Ending December 31,

Question

JORGE COMPANY
CVP Income Statement (Estimated)
For the Year Ending December 31, 2014

Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for 60 cents per 16-ounce bottle to retailers, who charge customers 79 cents per bottle. For the year 2014, management estimates the following revenues and costs.
Sales $ 1,806,400 Selling expenses—variable $ 69,200 Direct materials 425,100 Selling expenses—fixed 65,400 Direct labor 352,400 Administrative expenses—variable 68,152 Manufacturing overhead—variable 313,500 Administrative expenses—fixed 61,800 Manufacturing overhead—fixed 284,500

Explanation / Answer

Variable cost Direct material 425100 Direct labor 352400 Manufacturing OH variable 313500 Selling expenses - variable 69200 Administrative expenses - variable 68152 Total variable cost 1228352 Total sales 1806400 Selling price per bottle 0.6 Total number of bottles 3010667 Variable cost per bottle 0.408 Fixed expenses Manufacturing OH fixed 284500 Selling expenses - fixed 65400 Administrative expenses - fixed 61800 411700 Contribution per unit ( 0.60 - 0.41) 0.19 1) Break even point ( units) = Fixed cost / Contribution per unit                                                     = 411700 / 0.19                                                       = 2166842 2) Breakeven point ( $) = 2166842 *0.60                                           = 1300105 Contribution margin ration = contribution per unit / Selling price per unit                                                         = 0.19 / 0.6 *100                                                          = 31.67% Margin of safety ratio = ( Actual sales - Breakeven sales )/ Actual sales                                              = ( 1806400 - 1300105) / 1806400                                              = 506295/1806400 * 100                                               = 28.03% Required net income 239100 Total fixed cost 411700 Total amount to be recovered 650800 Contribution per unit 0.19 Required sales units ( in units) 3425263 Required sales $(3425263 * 0.60) 2055158

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