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Utech Company bottles and distributes Livit, a diet soft drink. The beverage is sold for 50 cents per 16 ounce bottle to retailers, who charge customers 75 cents per bottle. During the year 2008, management estimates the given revenues and costs.

Make a CVP income statement; find out break-even point, contribution margin ratio, margin of safety ratio and sales for target net income.

Net sales $1,800,000

Direct materials 430,000

Direct labor 352,000

Manufacturing overhead-variable 316,000

Manufacturing overhead-fixed 283,000

Selling expenses-variable $70,000

Selling expenses-fixed 65,000

Administrative expenses-variable 20,000

Administrative expenses-fixed 60,000

Instructions:

a) Make a CVP income statement for 2008 based on management's estimates.

b) find out the break-even point in (1) units and (2) dollars.

c) find out the contribution margin ratio and the margin of safety ratio.

d) Find out the sales dollars needed to earn net income of $238,000.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M919164

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