Question
Savvy Soda Company (SSC) bottles and distributes Mango Soda, a sparkling fruit drink. The company has been in business in Quispamsis, New Brunswick for seven
Savvy Soda Company (SSC) bottles and distributes Mango Soda, a sparkling fruit drink. The company has been in business in Quispamsis, New Brunswick for seven years. SSC imports its mangoes from Florida and has experienced increased product costs over the last year.
Mango Soda is sold for $.80 cents per 500-ml bottle to retailers, who then charge customers $0.99 per bottle. For the 2021 fiscal year, management has estimated the following revenues and costs:
Net sales | $2,000,000 |
Direct materials | 360,000 |
Direct labour | 590,000 |
Manufacturing overhead - variable | 270,000 |
Manufacturing overhead - fixed | 220,000 |
Selling expenses - variable | 100,000 |
Selling expenses - fixed | 78,000 |
Administrative expenses - variable | 150,000 |
Administrative expenses - fixed | 40,000 |
Required:
- Prepare a CVP income statement for 2021 based on management's estimates.
- Calculate the contribution margin ratio and the break-even point in (1) dollars and (2) units.
- Calculate the margin of safety ratio.
- Determine the sales required to earn net income of $272,000.
- Describe the features of a CVP income statement that make it more useful for management decision-making than the traditional income statement that is prepared for external users.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started