Problem 18-2A (Part Level Submission) Jorge Company bottles and distributes B-Li
ID: 2571905 • 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 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.
Determine the sales dollars required to earn net income of $41,600. (Round answer to 0 decimal places, e.g. 1,225.)
Sales $2,064,000 Selling expenses—variable $70,000 Direct materials 440,000 Selling expenses—fixed 45,000 Direct labor 300,000 Administrative expenses—variable 68,400 Manufacturing overhead—variable 360,000 Administrative expenses—fixed 52,000 Manufacturing overhead—fixed 637,400Explanation / Answer
Sales = 2,064,000
Variable costs = Direct materials + Direct labour + Variable manufacturing overheads + Variable selling expenses + Variable adminstrative expenses
= 440,000 + 300,000 + 360,000 + 70,000 + 68,400
= 1,238,400
Fixed costs = Fixed manufacturing overhead + Fixed selling expenses + Fixed administrative expenses
= 637,400 + 45,000 + 52,000
= 734,400
Desired Income = 41,600
The sales dollars required to earn net income of $ 41,600 = [Fixed costs + Desired Income] / [(Sales - variable costs) / sales)]
= [734,400 + 41,600] / [(2,064,000 - 1,238,400) / 2,064,000]
= 776,000 / 0.4
= 1,940,000.