Question

CALCULATOR PRINTER VERSION BACK NE Problem 5-3A (Video) Sheridan 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 75 cents per bottle. For the year 2020, management estimates the following revenues and costs. Sales $1,980,000 Seling experses variable $79,000 Direct materials 500,000 Selling experses-feed 56,000 Direct labor 380,000 Administrative expenses variable 27,000 Manufacturing overhead-variable 400,000 Administrative expenses-fored 179,500 Manufacturing overhead-fixed 210,000 Prepare a CVP Income statement for 2020 based on management's estimates SHERIDAN COMPANY CVP Income Statement (Estimated) For the Year Ending December 31, 2020 Sales 1,980,000 Variable Expenses . Cost of Goods Sold . Is00000 Selling Expenses 79000 Administrative Expenses 27,000 Total Variable Expenses Contribution Margin Fixed Expenses Cost of Goods Sold + Selling Expenses . Totalred E

Answer 1

Answer:

Requirement A:

SHERIDAN COMPANY

CVP Income Statement (Estimated)

For The Year Ending December 31, 2020

	$	$
Sales		1,980,000
Variable expenses:
Cost of goods sold	1,280,000
Selling expenses	79,000
Adminstrative expenses	27,000
Total variable expenses		1,386,000
Contribution margin		594,000
Fixed expenses:
Cost of goods sold	210,000
Selling expenses	56,000
Administrative expenses	179,500
Total fixed expenses		445,500
Net income		148,500

Requirement B:

Variable cost per bottle percentage = (Total variable cost/sales)×100

Total variable cost = 1,386,000

Sales = 1,980,000

Variable cost per bottle percentage = ($1,386,000/$1,980,000) × 100 = 70%

Variable cost per bottle = Selling price × Variable cost per bottle percentage

= 0.60 cents × 70%

= 0.42 per bottle

Variable cost per bottle = $ 0.42

Now,

Break even point in units = Fixed cost / contribution margin per unit

Fixed cost = 445,500

Contribution margin per unit = 0.18

Break even point = 445,500 / 0.18 = 2,475,000

Break even point in dollars = Fixed cost / contribution margin ratio

Fixed cost = 445,500

Contribution margin ratio = 30%

Break even point in dollars = 445,500 / 0.30 = $1,485,000

Requirement C:

Contribution margin ratio = Contribution margin/ sales

= 594,000 / 1,980,000

= 30%

Contribution margin ratio = 30%

Margin of safety ratio = (Actual sales - BEP sales ) / Actual sales

= (1,980,000 - 1,485,000) / 1,980,000

= 25%

Requirement D:

Required sales dollars:

= (Fixed cost+Required income) / contribution margin ratio

= (445,500 + 150,000) / 30%

= 1,985,000

Required sales = $1,985,000

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Have a great day Champ!

Happy Chegging.