Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is
ID: 2718741 • 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 2017, management estimates the following revenues and costs.
Sales
$1,640,000
Selling expenses—variable
$50,000
Direct materials
420,000
Selling expenses—fixed
70,000
Direct labor
350,000
Administrative expenses—variable
30,000
Manufacturing overhead—variable
380,000
Administrative expenses—fixed
48,000
Manufacturing overhead—fixed
208,250
Calculate variable cost per bottle. (Round variable cost per bottle to 3 decimal places, e.g. 0.251.)
Variable cost per bottle
Compute the break-even point in (1) units and (2) dollars.
(Round answers to 0 decimal places, e.g. 1,225.)
1) Compute the break-even point in units
2) Compute the Break Even Point
$
Compute the contribution margin ratio and the margin of safety ratio.
(Round variable cost per bottle to 3 decimal places, e.g. 0.25 and final answers to 0 decimal
places, e.g. 25%.)
Contribution Margin Ratio
Margin of Safety Ratio
Determine the sales dollars required to earn net income of $165,000.
(Round answer to 0 decimal places, e.g. 1,225.)
Required sales dollars $
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
$1,640,000
Selling expenses—variable
$50,000
Direct materials
420,000
Selling expenses—fixed
70,000
Direct labor
350,000
Administrative expenses—variable
30,000
Manufacturing overhead—variable
380,000
Administrative expenses—fixed
48,000
Manufacturing overhead—fixed
208,250
Calculate variable cost per bottle. (Round variable cost per bottle to 3 decimal places, e.g. 0.251.)
Variable cost per bottle
Compute the break-even point in (1) units and (2) dollars.
(Round answers to 0 decimal places, e.g. 1,225.)
1) Compute the break-even point in units
2) Compute the Break Even Point
$
Compute the contribution margin ratio and the margin of safety ratio.
(Round variable cost per bottle to 3 decimal places, e.g. 0.25 and final answers to 0 decimal
places, e.g. 25%.)
Contribution Margin Ratio
Margin of Safety Ratio
Determine the sales dollars required to earn net income of $165,000.
(Round answer to 0 decimal places, e.g. 1,225.)
Required sales dollars $
Explanation / Answer
Sales Value $1,640,000 Selling Price per Unit 0.5 No of Bottles 3280000 Particulars Per Bottle Cost 3280000 Bottles Sales $0.5 $1,640,000 Less: Variable Expenses Direct Materials $0.1 $420,000 Direct Labour $0.1 $350,000 Manufacturing overhead- variable $0.1 $380,000 Selling Expenses- variable $0.0 $50,000 Administrative Expenses- Variable $0.0 $30,000 Total Variable Expenses $0.4 $1,230,000 Contribution Margin (1640000-1230000) $0.1 $410,000 Less: Fixed Costs Manufacturing overhead- Fixed $208,250 Selling Expenses- Fixed $70,000 Administrative Expenses- Fixed $48,000 Total Fixed Costs $326,250 Net Operating Income $83,750 Contribution Margin Ratio: Contribution/Sales: 0.125/0.5 25% Variable Cost per Bottle $0.375 Break Even Points (Units): Fixed Cost/Contribution margin per unit: 326250/0.125 2610000 Break Even Points (Sales): Fixed Cost/Contribution margin Ratio: 326250/25% $1,305,000 Contribution Margin Ratio: Contribution/Sales: 0.125/0.5 25% Margin of Safety Ratio: (Sales-Breakeven sales)/Sales : (1640000-1305000)/1305000 25.67% Required Net Operating Income 165000 Required Sales: Fixed Cost+Net Operating Income)/Contribution Margin Ratio : (326250+165000)/25% 1965000
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