Question 1 Jorge Company bottlies and distributes B-Lite, a diet soft drink. The

Question

Question 1 Jorge Company bottlies 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 Manufacturing overhead-variable Manufacturing overhead-fixed $1,870,000 Selling expenses-variable 400,000 Selling expenses-fixed 360,000 Administrative expenses-variable 450,000 Administrative expenses-fixed 304,000 $50,000 55,000 49,000 52,000 Prepare a CVP income statement for 2017 based on management's estimates. JORGE COMPANY CVP Income Statement (Estimated) 1870000 Variable Expenses Cost of Goods Sold Selling Expenses Adinistrative Expenses

Explanation / Answer

Jorge Company CVP Income Statement (Estimated) For the Year Ending December31, 2017 Sales 18,70,000 Variable expenses: Cosr of goods Sold         12,10,000 Selling expenses               50,000 Administrative Expense               49,000 Total Variable Expenses 13,09,000 Contribution Margin      5,61,000 Fixed Expenses: Cosr of goods Sold           3,04,000 Selling expenses               55,000 Administrative Expense               52,000 Total Fixed Expenses      4,11,000 Net income      1,50,000 Number of bottles sold = 1,870,000/0.5 = 3,740,000 Variable Cost Per Bottle = 1,309,000/3,740,000 = 0.35 Break even in unit sales = Fixed expenses/ contribution per unit Contribution Per unit = 0.50-0.35 = 0.15 per bottle Break even in unit sales = 411,000/0.15 =2,740,000 bottles Break even in dollar sales = Break even units * selling price per unit =2,740,000 * 0.50 =$1,370,000 Contribution Margin ratio= Contribution margin/Sales *100 = 561,000/1,870,000 =30% Margin of safety percentage (Actual sales - Break even sales)/ Actual Sales *100 = (1870000-1370000)/1870000X100 = 27%

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