Question

Problem 11-2 Bramble 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. Sales $1,840,000 Selling expenses—variable $60,000 Direct materials 390,000 Selling expenses—fixed 55,000 Direct labor 320,000 Administrative expenses—variable 34,000 Manufacturing overhead—variable 300,000 Administrative expenses—fixed 46,000 Manufacturing overhead—fixed 417,000

Prepare a CVP income statement for 2017 based on management’s estimates. BRAMBLE COMPANY CVP Income Statement (Estimated) For the Month Ended December 31, 2017December 31, 2017For the Year Ending December 31, 2017 Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit $ Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit     Administrative Expenses    Contribution Margin    Cost of Goods Sold    Fixed Expenses    Net Income/(Loss)    Sales    Selling Expenses    Total Fixed Expenses    Total Variable Expenses    Variable Expenses    Gross Profit     $     Administrative Expenses    Contribution Margin    Cost of Goods Sold    Fixed Expenses    Net Income/(Loss)    Sales    Selling Expenses    Total Fixed Expenses    Total Variable Expenses    Variable Expenses    Gross Profit         Administrative Expenses    Contribution Margin    Cost of Goods Sold    Fixed Expenses    Net Income/(Loss)    Sales    Selling Expenses    Total Fixed Expenses    Total Variable Expenses    Variable Expenses    Gross Profit         Administrative Expenses    Contribution Margin    Cost of Goods Sold    Fixed Expenses    Net Income/(Loss)    Sales    Selling Expenses    Total Fixed Expenses    Total Variable Expenses    Variable Expenses    Gross Profit     Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit     Administrative Expenses    Contribution Margin    Cost of Goods Sold    Fixed Expenses    Net Income/(Loss)    Sales    Selling Expenses    Total Fixed Expenses    Total Variable Expenses    Variable Expenses    Gross Profit         Administrative Expenses    Contribution Margin    Cost of Goods Sold    Fixed Expenses    Net Income/(Loss)    Sales    Selling Expenses    Total Fixed Expenses    Total Variable Expenses    Variable Expenses    Gross Profit         Administrative Expenses    Contribution Margin    Cost of Goods Sold    Fixed Expenses    Net Income/(Loss)    Sales    Selling Expenses    Total Fixed Expenses    Total Variable Expenses    Variable Expenses    Gross Profit         Administrative Expenses    Contribution Margin    Cost of Goods Sold    Fixed Expenses    Net Income/(Loss)    Sales    Selling Expenses    Total Fixed Expenses    Total Variable Expenses    Variable Expenses    Gross Profit     Administrative ExpensesContribution MarginCost of Goods SoldFixed ExpensesNet Income/(Loss)SalesSelling ExpensesTotal Fixed ExpensesTotal Variable ExpensesVariable ExpensesGross Profit $

Compute the break-even point in (1) units and (2) dollars. (1) Compute the break-even point units (2) Compute the break-even point $

Compute the contribution margin ratio and the margin of safety ratio. (Round variable cost per bottle to 3 decimal places, e.g. 0.255 and final answers to 0 decimal places, e.g. 25%.) Contribution margin ratio % Margin of safety ratio %

Determine the sales dollars required to earn net income of $254,000. Required sales dollars $

Answer 1

1840000 Required: A Bramble Company CVP Income Statement (Estimated) For the Year Ending December 31, 2017 Sales Variable expenses: Cost of goods sold 1010000 Selling expenses 60000 Administrative expenses 34000 Total Variable expenses Contribution margin Fixed expenses: Cost of goods sold 417000 Selling expenses 55000 Administrative expenses 46000 Total Fixed expenses Net Income 1104000 736000 518000 218000

Required: B Variable cost per bottel percentage = (Total variable cost/Sales) *100 Total Vaiable cost 1104000 Sales 1840000 Variable cost per bottel percentage 60 % Beverage sold for Variable cost per bottel percentage Variable cost per bottel 0.50 Cent per bottel 60% 0.300 per bottel Breakeven point units = Fixed cost / Contribution margin per unit Fixed cost 518000 Contribution margin perunit 0.20 Break even point units 2590000 units Breakeven point units = Fixed cost / Contribution margin per unit Fixed cost 518000 Contribution margin ratio 0.40 Break even point Dollars 1295000 Dollars

Required: Contribution margin ratio = Contribution margin / Sales Contribution margin 0.20 Sales 0.50 Contribtuion margin ratio 40 % Margin safety ratio = (Actual sales - Bep Sales) / actual sales Actual sales - Bep sales 545000 Actual sales 1840000 Margin safety ratio 30 % Required: D Required sales dollars = (Fixed cost + Required Incomel/Contribution margin ratio Fixed cost 518000 Required Income 254000 Contribution margin ratio 0.40 Required sales dollars 1930000