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 60 cents per 16-ounce bottle to retailers, who charge customers 90 cents per bottle. For the year 2017, management estimates the following revenues and costs.

Prepare a CVP income statement for 2017 based on management’s estimates.

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Sales $2,052,000 Selling expenses—variable $60,000 Direct materials 460,000 Selling expenses—fixed 60,000 Direct labor 300,000 Administrative expenses—variable 83,800 Manufacturing overhead—variable 430,000 Administrative expenses—fixed 58,000 Manufacturing overhead—fixed 539,300

Explanation / Answer

JORGE COMPANY

CVP Income statement

for the year ended December 31 2017

**Variable cost of sales =direct material +direct labor +manufacturing overhead -variable

     = 460000+300000+430000

    = 1190000

JORGE COMPANY

CVP Income statement

for the year ended December 31 2017

Sales 2,052,000 Less:variable expense Variable cost of sales 1190000 selling exense -variable 60000 Administrative expenses—variable 83800 Total Variable cost (1333800) contribution margin 718200 less:Fixed cost Manufacturing overhead—fixed 539300 Selling expenses—fixed 60000 Administrative expenses—fixed 58000 Total fixed cost (657300) Net operating income 60900

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