Question

Ivanhoe 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 Direct materials Direct labor Manufacturing overhead-variable Manufacturing overhead-fixed $1,950,000 Selling expenses-variable 470.000 Selling expenses-fixed 340,000 Administrative expenses-variable 360,000 Administrative expenses-fixed 230,000 $171,000 59.000 24,000 120,500

Answer 1

Requirement 1 IVANHOE COMPANY CVP Income Statement (Estimated) For the Year Ending December 31, 2020 $ 19,50,000.00 $ 11,70,000.00 $ 1,71,000.00 $ 24,000.00 Sales Variable expenses Cost of goods sold Selling expenses administrative expenses Total Variable expenses Contribution margin Fixed expenses Cost of goods sold Selling expenses administrative expenses Total Fixed expenses Net Income $ 13,65,000.00 $ 5,85,000.00 $ 2,30,000.00 $ 59,000.00 $ 1,20,500.00 $ 4,09,500.00 $1,75,500.00 Requirement 2 Sales Selling price Number of units sold Total variable expenses $ 19,50,000.00 0.50 3900000 $ 13,65,000.00 Variable cost per unit 0.35 Per Unit Requirement 3 Break even point in units = Total fixed costs / Contribution margin per bottle $409500 / 0.15 27,30,000 Units Break even point in dollars = Total fixed costs / Contribution margin ratio $409500 / 30% 13,65,000.00 Requirement 4 Contribution margin ratio = 585000/1950000 Margin of safety ratio = (1950000-1365000)/1950000 30% 30% Requirement 5 Sales required to earn target profit = (409500+240852) / 30% $ 21,67,840.00