Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is
ID: 2503103 • 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 2014, management estimates the following revenues and costs.
Prepare a CVP income statement for 2014 based on managemental estimates.
Sales 1,800,000
direct materials 430,000
direct labor 360,000
manufacturing overhead- variable 380,000
manufacturing overhead- fixed 280,000
Selling expenses- variable 70,000
Selling expenses- fixed 65,000
Administrative expenses- 20,000
Administrative expenses- 60,000
calculate the variable cost per bottle. -round to 2 decimal places
Compute the break-even point in (1) units and (2) dollars. -round to 0 decimal places
Compute the contribution margin ratio and the margin of safety ratio. -round to 2 decimal places
Determine the sales dollars required to earn net income of $180,000. -round to 0 decimal places
Explanation / Answer
1
Total Variable Cost = 430,000 + 360,000 + 380,000 + 70,000 + 20,000 = $1,260,000
Total Fixed Costs = 280,000 + 65,000 + 60,000 = $405,000
No. of units sold = Sales / Price per unit = 1,800,000 / 0.5 = 3,600,000
Variable Cost per unit = 1,260,000 / 3,600,000 = $0.35 / unit
Contribution Margin per unit = Sale Price - Variable Cost per unit
= 0.5
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