jorge company bottles and distributes b-lite, a diet soft drink.

P5-2A 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.

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