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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:

  1. Prepare a CVP income statement for 2021 based on management's estimates.
  2. Calculate the contribution margin ratio and the break-even point in (1) dollars and (2) units.
  3. Calculate the margin of safety ratio.
  4. Determine the sales required to earn net income of $272,000.
  5. 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.

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