Question

Styles Editing Problem 19-2B THIS is your "Bob-Homework" Prob 19-2B & Prob 19-3B (a) ALL FRUTE COMPANY CVP Income Statement (Estimated) For the Year Ending December 31, 2016 These problems are NOT in your textbook. Required: below this problem 8 (next page) are the "working papers" for you to complete and then subenit to the instructor-by the due date. Sales 2,500,000 Variable Expenses Optional: Below the Prob B "working papers" (scrolI 3 pages) are answers to similar, Prob A. If needed, refer to the Prob A to help you complete your problem B assignment Total Variable Expenses I Contribution Margin Fixed Expenses P19-28 AlIl Frute Company bottles and distributes Frute Ade, a fruit drink. The beverage is sold foe 50 centsi per 10-ounce bottle to retailers, who charge customers 70 cents per bottle. For the year 2017, management estimates the following revenues and costs. Total Fixed Expenses Selling expenses-variables Selling expenses fixedi Admin Expense- variable- Admin Expenses fixed Sales $2,500,000 360,000 S R0,000 Direct materials 250,000 Net Income Direct labor 450,000 40,000 (Drect maaias $360000direct abor $450 000+vaabe anuachning overhead $270,000 Mig Overhead variable Mtg Cverhead- fixedi 270,000 380,000 150,000 (b) Variable costs Instructions Total fixed costs- (a) Prepare a eVP income statement for 2017 based on management's estimates. (Show column for total amounts only.) 1) Breakeven in units (b) Compute the break even point in 13) units and (2) dollars. 21 Breakeven in dollars I Compute the contribution margin ratio and the margin of safety ratio. Id) Deteemiese the sales dollars required to earn net income of $624,000. (c) Contribution margin ratio - Margin of safety ratio- (d) Required sales See Below O Te tere soseah STIG019

Answer 1

Requirement a

Sales		$      2,500,000
variable expenses
Direct Material	$      360,000
Direct labour	$      450,000
Manufacturing Overheads	$      270,000
Selling Expenses	$        80,000
Admin Expenses	$        40,000
Total		$      1,200,000
Contribution Margin		$      1,300,000
Fixed Expenses
Manufacturing Overheads	$      380,000
Selling Expenses	$      250,000
Admin Expenses	$      150,000
Total		$         780,000
net Income		$         520,000

Requirement b

Requirement	Answer	Calculation
Variable Costs	$      1,200,000
Fixed Costs	$         780,000
1. Break Even in Units	3,000,000	780000/(0.5-0.24)
2. Break Even in Dollars	$      1,500,000	(780000/(0.5-0.24))*0.50

Requirement c

Requirement	Answer	Calculation
Contribution Margin ratio	52%	1300000/2500000
Margin of Safety Ratio	40%	(2500000-1500000)/2500000

Requirement d

Requirement	Answer	Calculation
Required sales	$      2,700,000	((780000+624000)/(0.5-0.24))*0.50

Explanation - Formulae used:

1. Break even Point in units = Fixed Cost / Contribution per unit
2. Contribution per unit = Selling price - Variable Cost per Unit
3. Break even Point in Dollars = (Fixed Cost / Contribution per unit)* Selling Prive
4. Contribution Margin ratio = Contribution / Sales *100
5. Margin of safety ratio = Margin of safety / Sales *100
6. Margin of safety = Sales - Break even Point in Dollars
7. Sales for desired Profit = ((Fixed Cost +Desired Profit) / Contribution per unit)* Selling Prive

In case of any doubt, please comment.