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BUSI5233

Prepare a CVP income statement, compute break-even point, contribution margin ratio, margin of safety ratio and sales for target net income

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P5-2A  Prepare a CVP income statement, compute break-even point, contribution margin ratio, margin of safety ratio  
   and sales for target net income                  
Jorge 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 2017, management estimates the following revenues  
and costs.                        
  Sales       $1,800,000   Selling expenses - variable   $70,000    
  Direct materials     430,000   Selling expenses - fixed   65,000    
  Direct labor     360,000   Administrative expenses - variable 20,000    
  Manufacturing overhead- variable 380,000   Administrative expenses - fixed 60,000    
  Manufacturing overhead -fixed 280,000                
                           
Instructions                      
(a) Prepare a CVP income statement for 2017 based on management estimates.  (show column for total amounts only.)  
(b) Compute the break-even point in (1) units and (2) dollars.            
(c ) Compute the contribution margin ratio and the margin of safety ratio. (Round to the nearest full percent.)    
(d) Determine the sales dollars required to earn net income of $180,000.          
NOTE:  Enter a number in cells requesting a value; enter either a number or a formula in cells with a "?" .

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