Question

Crane Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 75 cents per bottle. For the year 2020, management estimates the following revenues and costs.

Sales		$1,550,000		Selling expenses—variable		$72,000
Direct materials		440,000		Selling expenses—fixed		53,000
Direct labor		340,000		Administrative expenses—variable		28,000
Manufacturing overhead—variable		360,000		Administrative expenses—fixed		48,500
Manufacturing overhead—fixed		100,000

Prepare a CVP income statement for 2020 based on management’s estimates.

CRANE COMPANY CVP Income Statement (Estimated) For the Year Ending December 31, 2020
select an income statement item                                                                      Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit				$enter a dollar amount
select an opening name for section one                                                                      Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit
select an income statement item                                                                      Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit		$enter a dollar amount
select an income statement item                                                                      Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit		enter a dollar amount
select an income statement item                                                                      Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit		enter a dollar amount
select a closing name for section one                                                                      Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit				enter a total amount for section one
select a summarirzing line for the first part                                                                      Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit				enter a total amount for the first part
select an opening name for section two                                                                      Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit
select an income statement item                                                                      Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit		enter a dollar amount
select an income statement item                                                                      Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit		enter a dollar amount
select an income statement item                                                                      Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit		enter a dollar amount
select a closing name for section two                                                                      Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit				enter a total amount for section two
select a closing name for this statement                                                                      Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit				$enter a total net income or loss amount

eTextbook and Media

  

  

Calculate variable cost per bottle. (Round variable cost per bottle to 3 decimal places, e.g. 0.251.)

Variable cost per bottle

$enter Variable cost per bottle in dollars rounded to 3 decimal places

eTextbook and Media

  

  

Compute the break-even point in (1) units and (2) dollars. (Round answers to 0 decimal places, e.g. 1,225.)

(1)		Compute the break-even point		enter the break-even point in units	units
(2)		Compute the break-even point		$enter the break-even point in dollars

eTextbook and Media

  

  

Compute the contribution margin ratio and the margin of safety ratio. (Round variable cost per bottle to 3 decimal places, e.g. 0.25 and final answers to 0 decimal places, e.g. 25%.)

Contribution margin ratio		enter the contribution margin ratio in percentages rounded to 0 decimal places	%
Margin of safety ratio		enter the Margin of safety ratio in percentages rounded to 0 decimal places	%

eTextbook and Media

  

  

Determine the sales dollars required to earn net income of $180,000. (Round answer to 0 decimal places, e.g. 1,225.)

Required sales dollars

$enter the Required sales dollars

Answer 1

A)
	Sales					1,550,000
	Variable expenses
	cost of goods sold				1140000
	Selling expenses				72,000
	Administrative expense				28,000
	total variable expense					1,240,000
	Contribution margin					310,000
	fixed expenses
	cost of goods sold				100,000
	Selling expenses				53,000
	Administrative expense				48,500
	total fixed expense					201,500
	Net income					108,500
b-1)	Variable cost per bottle
	Number of bottles = 1,550,000/.50
			3100000
	1,240,000/3,100,000
	0.4	answer
b2)	Contribution margin per unit = 310,000/3,100,000
				0.1
	Break even units = fixed cost/contribution margin per unit
			201,500/.1
			2015000	units	answer
	Break even point dollars = 2015000*.5
			1007500	answer
c)	Contribution margin ration =			.1/.5
				0.2
				20%	answer
	margin of safety = actual sales - BEP sales
			1,550,000-1,007,500
			542,500
	margin of safety ratio = 542,500/1,550,000
			35%	answr
d)	Sales dollar required = ( fixed cost+target profit)/contribution margin ratio
			(201500+180000)/20%
			1907500	answer