Sports Drinks, Inc. began business in 2018 selling bottles of a thirst-quenching drink. Sales in 2018...
Sports Drinks, Inc. began business in 2018 selling bottles of a thirst-quenching drink. Sales in 2018 were 99,000 bottles. The selling price per bottle was $3.10. Variable cost per bottle was $1.35. Annual fixed costs were $63,200.
1. Please use the format of a contribution margin income statement to calculate the contribution margin (in dollars), unit contribution, and contribution margin ratio for Sports Drinks. You can refer to Example 1 in the textbook.
Total Per Unit Percentage
Sales (xxx units)
Less: Variable costs
Contribution margin
Less: Fixed costs
Net income
2. What will be the break-even point in units and in dollars if we assume that Sports Drinks sells this product only?
3. How many units must the company sell to earn a pre-tax income of $200,000?
4. If the company’s tax rate is 35 percent, how many bottles must be sold to earn an after-tax profit of $180,000?
5. What is the company’s margin of safety based on the sales of 99,000 bottles?
6. Assume that there is no change in fixed costs. What will be the expected net income if this company has the sales revenue of $325,500?
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