All Frute Company bottles and distributes Frute Ade, a fruit drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 70 cents per bottle. For the year 2014, management estimates the following revenues and costs.

Sales $2,500,000 Selling expenses—variable $ 80,000 Direct materials 360,000 Selling expenses—fi xed 250,000 Direct labor 450,000 Administrative expenses—

Manufacturing overhead— variable 40,000 variable 270,000 Administrative expenses—

Manufacturing overhead— fi xed 150,000 fi xed 380,000 Instructions

(a) Prepare a CVP income statement for 2014 based on management’s estimates. (Show column for total amounts only.)

(b) Compute the break-even point in (1) units and (2) dollars.

(c) Compute the contribution margin ratio and the margin of safety ratio.

(d) Determine the sales dollars required to earn net income of $624,000.

AppendixLO1