The company Wake Up manufactures and distributes a bottled coffee cold drink. The company has been in business for 5 years. The coffee beverage is sold for $1.50 per bottle to retailers across North America. When the company is operating at 100% capacity, the following revenues and costs are estimated as follows:

Net sales

$3 Million

Selling expensesvariable

$35,000

Direct materials

700,000

Selling expensesfixed

14,000

Direct labour

1,000,000

Administrative expensesvariable

15,000

Manufacturing overheadvariable

400,000

Administrative expensesfixed

30,000

Manufacturing overheadfixed

170,000

Instructions

a.Calculate the net income for the year using the Cost Volume Profit (CVP) approach? Present your answer in the CVP income statement format.

b.Calculate the break-even point in units and dollars.

c.How much is the contribution margin ratio.

d. Explain the benefit for the company in knowing the break-even point.