Problem 18-2A (Part Level Submission) Jorge Company bottles and distributes B-Li

Question

Problem 18-2A (Part Level Submission) Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for 60 cents per 16-ounce bottle to retailers, who charge customers 90 cents per bottle. For the year 2017, management estimates the following revenues and costs. Sales Direct materials Direct labor Manufacturing overhead-variable Manufacturing overhead-fixed $70,000 45,000 68,400 52,000 $2,064,000 Selling expenses-variable 440,000 Selling expenses-fixed 00,000 Administrative expenses-variable 360,000 Administrative expenses-fixed 637,400

Explanation / Answer

1 Direct materials 440000 Direct labor 300000 Manufacturing overhead 360000 Selling expenses 70000 Administrative expenses 68400 Total variable costs 1238400 No of bottles 3440000 Variable cost per bottle 0.36 2 Break even point units = Fixed costs/Unit contribution margin =(637400+45000+52000)/(0.6-0.36)= 3060000 Break even point $ =3060000*0.6= 1836000 3 Contribution margin ratio = (0.6-0.36)/0.6= 40% Margin of safety ratio = (2064000-1836000)/2064000= 11% 4 Required dollars sales=(637400+45000+52000+180000)/(0.6-0.36)= 3810000

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