Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for $0.50 per 16-ounce bottle to retailers, who charge customers $0.75 per bottle. For the year 2014, management estimates the following revenues and costs:
|
Net 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 2014 based on management's estimates.
(b) Compute the break-even point in (1) units and (2) dollars.
(c) Compute the contribution margin ratio and the margin of safety ratio.