P5-2A Prepare a CVP income statement, compute break-even point, contribution margin ratio, margin of safety ratio and sales for target net income 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 $1,800,000 Selling expenses - variable $70,000 Direct materials 430,000 Selling expenses - fixed 65,000 Direct labor 360,000 Administrative expenses - variable 20,000 Manufacturing overhead- variable 380,000 Administrative expenses - fixed 60,000 Manufacturing overhead -fixed 280,000

Instructions

(a) Prepare a CVP income statement for 2017 based on management 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. (Round to the nearest full percent.) (d) Determine the sales dollars required to earn net income of $180,000.