Problem 18-2A (Part Level Submission) Jorge Company bottles and distributes B-Li
ID: 2564086 • Letter: P
Question
Problem 18-2A (Part Level Submission) 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 2017, management estimates the following revenues and costs $50,000 55,000 49,000 52,000 $1,870,000 Selling expenses-variable Direct materials Direct labor Manufacturing overhead-variable Manufacturing overhead-fixed 400,000 Seing expenses-fixed 360,000 Administrative expenses-variable 450,000 Administrative expenses-fixed 304,000Explanation / Answer
Sales $ 18,70,000 Direct Materials $ 4,00,000 Direct Labour $ 3,60,000 Manufacturing overhead - Variable $ 4,50,000 Manufacturing overhead - Fixed $ 3,04,000 Selling Expenses - Variable $ 50,000 Selling Expenses - Fixed $ 55,000 Administrative Expenses - Variable $ 49,000 Administrative Expenses - Fixed $ 52,000 Selling Price per Unit 50 Cents ($0.5) Units Sold = (Sales / Selling Price) ( 37,40,000 Total Variable Cost = (Manufacturing Overhead + Selling Expense + Administrative Expense) Fixed part ($4,50,000 + $50,000 + $49,000) $ 5,49,000 Here Variable Cost per Unit = Total Variable Cost / Units Sold ($5,49,000 / 37,40,000) $ 0.147 Total Fixed Cost = (Manufacturing Overhead + Selling Expense + Administrative Expense) variable part ($3,04,000 + $55,000 + $52,000) $ 4,11,000 Fixed Cost per Unit = Total Fixed Cost / Units Sold 0.110 (1) Break Even Point in Units = Fixed Cost / Contribution Margin per Unit Contribution Margin = Sales - Variable Cost ($18,70,000 - $5,49,000) $ 13,21,000.00 Contribution Margin per Unit = Contribution Margin / Unit Sold ($13,21,000 / 37,40,000) $ 0.353 Break Even Point in Units = Fixed Cost / Contribution Margin per Unit ($4,11,000 / $3.41) 11,63,618.471 (2) Break Even Point Sales = Selling Price * Break Even Point in Units ($0.5 * 1,20,662.567) $ 5,81,809.235 (3) Contribution Margin Ratio = (Contribution Margin / Sales) (13,21,000 / 18,70,000) * 100 70.642% (4) Margin of Safety Ratio = (Actual Sales - Break Even Sales) / Actual Sales (($18,70,000 - $5,81,809.235) / $18,70,000) 68.887% (5) Required Sales Units to earn net income of $54,250 = ((Require Profit + Fixed Cost) / Contribution Margin per unit) ($54,250 + $4,11,000) / $0.353) 13,17,210.447 Required Sales Dollars to earn net income of $54,250 = (Require Sales Units * 50 Cent) (13,17,210.45 * $0.50) $ 6,58,605.223