**P5-2A Prepare a CVP income statement, compute break-even point, contribution margin ratio, margin of safety ratio** |
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**and sales for target net income** |
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**Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for 50 cents per 16-ounce bottle** |
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**to retailers, who charge customers 75 cents per bottle. For the year 2017, management estimates the following revenues** |
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**and costs.** |
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**Sales** |
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**$1,800,000** |
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**Selling expenses – variable** |
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**$70,000** |
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**Direct materials** |
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**430,000** |
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**Selling expenses – fixed** |
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**65,000** |
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**Direct labor** |
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**360,000** |
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**Administrative expenses – variable** |
**20,000** |
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**Manufacturing overhead- variable** |
**380,000** |
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**Administrative expenses – fixed** |
**60,000** |
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**Manufacturing overhead -fixed** |
**280,000** |
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**Instructions** |
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**(a)** |
**Prepare a CVP income statement for 2017 based on management estimates. (show column for total amounts only.)** |
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**(b)** |
**Compute the break-even point in (1) units and (2) dollars.** |
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**(c )** |
**Compute the contribution margin ratio and the margin of safety ratio. (Round to the nearest full percent.)** |
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**(d)** |
**Determine the sales dollars required to earn net income of $180,000.** |
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**NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a “?” .** |
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