Problem 19-2A JORGE COMPANY CVP Income Statement (Estimated) For the Year Ending
ID: 2460382 • Letter: P
Question
Problem 19-2A
JORGE COMPANY
CVP Income Statement (Estimated)
For the Year Ending December 31, 2014
Problem 19-2A
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 78 cents per bottle. For the year 2014, management estimates the following revenues and costs.Sales $1,803,800 Selling expenses—variable $67,300 Direct materials 427,500 Selling expenses—fixed 66,300 Direct labor 358,000 Administrative expenses—variable 43,746 Manufacturing overhead—variable 312,000 Administrative expenses—fixed 62,700 Manufacturing overhead—fixed 282,200 Your answer is incorrect. Try again. Prepare a CVP income statement for 2014 based on management’s estimates.
JORGE COMPANY
CVP Income Statement (Estimated)
For the Year Ending December 31, 2014
Variable cost per bottle
$
Compute the break-even point in (1) units and (2) dollars. (Round answers to 0 decimal places, e.g. 1,225.)(1) Compute the break-even point units (2) Compute the break-even point
$
Compute the contribution margin ratio and the margin of safety ratio. (Round variable cost per bottle to 2 decimal places, e.g, 0.25 and final answers to 0 decimal places, e.g. 25%.)Contribution margin ratio % Margin of safety ratio % Determine the sales dollars required to earn net income of $242,800. (Round answers to 0 decimal places, e.g. 1,225.)
Required sales dollars
$
Explanation / Answer
Answer:1
Cost of goods sold = Direct material (427,500) + Direct labor(358,000) + variable manufacturing overhead (312,000)
Cost of goods sold= 1097500
Answer:2
Variable expenses are 67% of sales (12,08,546.00/18,03,800.00) or $.33 per bottle ($0.50*67%).
Answer:3
Break even point occurs when sales becomes equal to total cost. Therefore,
Let X be the break even units, then
0.50X = 0.33X+411200
411200 = 0.50X-0.33X = 0.17X
X = 411200/0.17
X = 2418823 units
Break even point in dollars = 2418823 *$0.50 = $1209411
Answer:4
Contribution margin ratio = (Sales price per unit - Variable cost per unit)/ sales price per unit
Contribution margin ratio =(0.50 - 0.33)/0.50 = 0.34 or 34%
Margin of safety ratio = (Sales - break even sales)/ sales
Margin of safety ratio =(18,03,800 - 1209411)/18,03,800= 0.329 or 32%
Answer:5
Required sales = (Fixed cost + required net income)/Contribution margin ratio
Required sales =(4,11,200+ 242800)/0.34 = $1923529
Jorge Company Estimated CVP income statement For the year ending December 31, 2014 Particulars Amount Net sales $ 18,03,800.00 Cost of goods sold $ 10,97,500.00 Selling expenses (variable) $ 67,300.00 Administrative expenses (variable) $ 43,746.00 Total variable expenses $ 12,08,546.00 Contribution margin $ 5,95,254.00 selling expenses (fixed) $ 66,300.00 Administrative expenses (fixed) $ 62,700.00 Manufacturing overhead (fixed) $ 2,82,200.00 Total fixed expenses $ 4,11,200.00 Net income $ 1,84,054.00