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 2023, 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
- Prepare a CVP income statement for 2023 based on management's estimates. (Show column for total amounts only)
- Compute the break-even point in (1) units and (2) dollars.
- Compute the contribution margin ratio and the margin of safety ratio. (Round to nearest full percent.).
- Determine the sales dollars required to earn net income of $180,000.
Solution
