Question

nd it rises by $1.10 per anie tB-Lite, a diet soft drink. The beverage is sold for 50 cents per 16-ounce to retailers, who charge customers 75 cents per bottle. For the year bevy 7, management estimates the and costs $1,800,00oSelling expenses- variable Sales Direct materials Direct labor Manufacturing overhead- variable 430,000 Selling expenses -fixed 360,000 380,000 Administrative expenses fixed 280,000 $70,000 65,000 20,000 60,000 Manufacturing overhead -fixed Instructions (a) Prepare b) Compute the break-even point in (1) units and (2) dollars. income statement for 2017 based on management estimates. (show column for total amounts only.) contribution margin ratio and the margin of safety ratio. (Round to the nearest full percent.) a CVP (c) Compute the (d) Determine the sales dollars required to ea rn net income of $180,000 r in cells requesting a value; enter either a number or a formula in cells with a"t (a) Prepare a CVP income statement for 2017 based on management estimates. (show column for total amounts only JORGE COMPANY CVP Income Statement (Estimated) For the Year Ending December 31, 2017 Value1,soo coo Variable expenses Cost of goods sold Selling expenses Administrative expenses Value Total variable expenses Contribution margin Fixed expenses Cost of goods sold Value

Answer 1

P5-2A)
a) CVP income statement, 2017:
Sales		1800000
Variable expenses:
COGS	1170000		(430000+360000+380000)
Selling expenses	70000
Administrative exp.	20000
Total variable expenses		1260000
Contribution margin		540000
Fixed expenses"
Cost of goods sold	280000
sellng expenses	65000
Administrative exp.	60000
Total Fixed expenses		405000
Net Income		135000
b) Break even point:
Break even point in units :
Unit Selling Price	0.75
Unit variable costs	0.525		1260000*0.75/1800000
Unit contribution margin	0.225
Fixed Costs	405000
Unit contribution margin	0.225
break even point in unit	1800000
Break even point in dollars
Break even point in units	1800000
Unit selling price	0.75
Break even point in dollars	1350000
c)
Contribution margin ratio:
Unit contribution margin	0.225
Unit selling price	0.75
Contribution margin ratio:	0.3
Margin of safety ratio
Total sales	1800000
Break even sales	1350000
Margin of safety (dollars)	450000
Total sales	1800000
Margin of safety ratio	0.25
d) Sales dollars to earn net income of $180000
Sales dollars required to earn target income:
Fixed costs	405000
Target income	180000
Total contribution required	585000
Contribution margin ratio	0.3
Sales dollars required	1950000