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Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for 60...

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.

Sales $1,848,000 Selling expenses—variable $70,000
Direct materials 440,000 Selling expenses—fixed 75,000
Direct labor 330,000 Administrative expenses—variable 23,600
Manufacturing overhead—variable 430,000 Administrative expenses—fixed 52,000
Manufacturing overhead—fixed 404,000

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

2. Calculate variable cost per bottle. (Round variable cost per bottle to 3 decimal places, e.g. 0.251.)

3. Compute the break-even point in (1) units and (2) dollars. (Round answers to 0 decimal places, e.g. 1,225.)
a. Compute break even point __ units

b. Compute break even point __ $$

4. 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%.)

a. Contribution margin ratio __%

b. Margin of safety ratio __%

5. Determine the sales dollars required to earn net income of $51,000

a. Required sales dollars __$$

  

Solutions

Expert Solution

2)variabel cost per unit= total variable cost/no of units sold
no of units sold= total sales/unit selling price
=1848000/0.6=3080000
Variable cost per unit=1293600/3080000=0.42
3)Break even point units=total fixed costs/unit contribution margin
break even point in dollars=Break even point units*unit selling price
4)Contributin margin ratio= contribution margin per unit/unit sselling price
=0.18/0.6=30%
Margin safety ratio= (total sales-breakeven sales)/total sales
Required sales= (net income+total fixed costs)/CM ratio

=(51000+531000)/30%=1940000


ekkarill92 answered 1 year ago
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