Question

Cullumber 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 2020, management estimates the following revenues and costs.

Sales		$1,750,000		Selling expenses—variable		$113,000
Direct materials		460,000		Selling expenses—fixed		50,000
Direct labor		390,000		Administrative expenses—variable		27,000
Manufacturing overhead—variable		410,000		Administrative expenses—fixed		77,500
Manufacturing overhead—fixed		100,000

a) Prepare a CVP income statement for 2020 based on management’s estimates.

b) variable cost per bottle: $   

c) compute break-even point: units   

d) compute break even point: $

e) contribution margin ratio: %

f) margin of safety ratio: %

g) determine the sales dollars required to earn net income of $190,000

Required sales dollars: $

Answer 1

Ansis - Cullumber Company CVP Income statement Yestimated) for the year Ending Dec., 31, 2020 Sales $1,750,000 $1,260,000 Variable Expenses : Cost of Goods sold selling Expenses | Administractive Expense $113,000 $27,00o Total Valuable Experises $14,00,000 Contribution margin $350,000 fixed Expenses. Cost of Goods sold selling Expenses Administrative expenser Toral fixed Expenses Net Income (loss) $100,000 $50,000 $77,500 $227,500 $122.500 (b) Variable Cost_per_bottle_$14,00,000 - 80% $1750,000 s 0.50 X 80% = 10.40 fer Bottle

- Break cues points e os 80.5o4 = 40.400t 8227,500 = 90. lone & $227,500 an & Q27,500 $0.10 n 6,275,000 units - ( d Break even point in dollars i 2,275,000 X0.50 fin bal $ 1137500 | Contribution margin Ratio = TEC $0.50 - $0.40 $0.50 ( margin of Safety Retio. sr $1750,000 - $1137500 til $1750,000 . - | 35 % 69) | Required, Sales, dollar B227.500 +$190.000 0.20 To a $ 82087.500 )
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