Peps Company bottles and distributes Peachy, a fruit drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 77 cents per bottle. For the year 2015, management estimates the following revenues and costs.

Net sales	$2,000,000	Selling expenses-variable	$ 100,000
Direct materials	500,000	Selling expenses-fixed	75,000
Direct labor	400.000	Administrative expenses variable	30,000
Manufacturing overhead variable	370,000	Administrative expenses fixed	25,000
Manufacturing overhead fixed	300,000

Instructions

Rounding instructions: Round to nearest whole number if necessary.

(a) Prepare a detailed CVP income statement for 2015 based on the managements estimates.

For the following steps, make sure you show all computations. Correct answers without computations will be marked as zero.

(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 $536,000.