Q:

Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for $0.50 per 16-ounce bottle to retailers, who charge customers $0.75 per bottle. For the year 2014, management estimates the following revenues and costs:

Net sales $2,000,000

Direct materials 400,000

Direct labor 350,000

Manufacturing overhead - Variable 400,000

Manufacturing overhead - Fixed 250,000

Selling expenses - Variable $75,000

Selling expenses - Fixed 55,000

Administrative expenses - Variable 2,000

Administrative expenses - Fixed 50,000

Instructions: (a) Prepare a CVP income statement for 2014 based on management's estimates

Net sales

Variable expenses

Cost of Goods Sold

Selling Expense

Administrative Expense

Total variable expenses

Contribution margin

Fixed expenses Cost of Goods

Sold Selling Expense

Administrative Expense

Total fixed expenses

Net income

(1) Computation of cost of goods sold

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

(1)

Net sales

Total variable expenses

Contributions

Variable costs as percentage of sales

Variable costs per bottle

Contributions per bottle

Total fixed costs

Break-even in units

(2) Break-even in units

Price per bottle

Break-even in dollars

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

Contribution margin ratio = = rounded

Margin of safety ratio = rounded

(d) Determine the sales dollars required to earn a net income of $180,000

Required sales = =