Question

Wildhorse 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 $100,000 Direct materials 450,000 Selling expenses-fixed 54,000 Direct labor 400,000 Administrative expenses-variable 22,000 Manufacturing overhead-variable 420,000 Administrative expenses-fixed 71,000 Manufacturing overhead-fixed 120,000 Prepare a CVP income statement for 2020 based on management's estimates. WILDHORSE COMPANY CVP Income Statement (Estimated) For the Year Ending December 31, 2020 V Calculate variable cost per bottle. (Round variable cost per bottle to 3 decimal places, e.g. 0.251.) Variable cost per bottle Compute the break-even point in (1) units and (2) dollars. (Round answers to decimal places, e.g. 1,225.) (1) Compute the break-even point units (2) Compute the break-even points Compute the contribution margin ratio and the margin of safety ratio. (Round variable cost per bottle to 3 decimal places, e.g. 0.25 and final answers to O decimal places, e.g. 25%) Contribution margin ratio Margin of safety ratio Determine the sales dollars required to earn net income of $200,000. (Round answer to O decimal places, e.g. 1,225.) Required sales dollars

Answer 1

Solution:

WILDHORSE COMPANY
CVP Income statement (Estimated)
For the year Ending December 31,2020
Sales		17,50,000
Variable expenses
Cost of goods sold	12,70,000
Selling expenses	1,08,000
Administrative expenses	22,000
Total variable expenses		14,00,000
Contribution margin		3,50,000
Fixed expenses
Cost of goods sold	1,20,000
Selling expenses	54,000
Administrative expenses	71,000
Total fixed expenses		2,45,000
Net Income		1,05,000

Varaible cost per bottle

0.4

Break even point in units
Units selling price	0.5
Units variable costs	0.4
Untis contribution margin	0.1
Fixed costs	2,45,000
Break even point in units	2450000
Break even point in dollars	1225000

Contribution margin ratio
Unit contribution margin	0.1
Unit selling price	0.5
Contribution margin ratio	20

Margin of safety ratio
Total sales	17,50,000
Break even sales	1225000
Margin of safety (dollars)	5,25,000
Total sales	17,50,000
Margin of safety ratio	30

Target Income	2,00,000
Fixed cost	2,45,000
Contribution margin ratio	0.2
Required sales dollars	2225000

9 Copy of HomeworkLib2 - Microsoft Excel (Product Activation Failed) X File Home Insert Page Layout Formulas Data Review View X % Cut AutoSum Calibri 11 A A E' Wrap Text General Normal Bad Good la Copy Fill- Paste B 1 U- A, - Merge & Center Calculation Conditional Format as Neutral Formatting Table Check Cell Insert Delete Format Format Painter 2 Clear Sort & Find & Filter - Select Editing Clipboard Font Alignment Number Styles Cells 125 f A B С D E F G H 1 J K L M N O P 1 2 3 4 0.5 16 17,50,000 Selling expenses-variable 4,50,000 Selling expenses-fixed 4,00,000 Administrative expenses - variable 4,20,000 Administrative expenses-fixed 1,20,000 Sales Direct materials Direct labour Manufacturing overhead - variable Manufacturing overhead - fixed 0.75 1,08,000 54,000 22,000 71,000 5 0.5 0.4 6 Break even point in units Units selling price Units variable costs Untis contribution margin Fixed costs Break even point in units Break even point in dollars 7 8 0.1 9 2,45,000 2450000 1225000 17,50,000 0.1 Contribution margin ratio Unit contribution margin Unit selling price Contribution margin ratio 0.5 20 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 WILDHORSE COMPANY CVP Income statement (Estimated) For the year Ending December 31,2020 Sales Variable expenses Cost of goods sold 12,70,000 Selling expenses 1,08,000 Administrative expenses 22,000 Total variable expenses Contribution margin Fixed expenses Cost of goods sold 1,20,000 Selling expenses 54,000 Administrative expenses 71,000 Total fixed expenses Net Income 14,00,000 3,50,000 Margin of safety ratio Total sales Break even sales Margin of safety (dollars) Total sales Margin of safety ratio 17,50,000 1225000 5,25,000 17,50,000 30 2,45,000 1,05,000 Target Income Fixed cost Contribution margin ratio Required sales dollars 2,00,000 2,45,000 0.2 2225000 Varaible cost per bottle 0.4 29 30 31 32 Sheet163 Sheet164 Sheet165 Sheet166 Sheet167 Sheet168 Sheet169 Sheet170 Sheet171 Sheet172 Sheet173 Ready M 100% Type here to search 1 O 76% חד ») ENG 23:09 21-09-2020

9 Copy of HomeworkLib2 - Microsoft Excel (Product Activation Failed) X File Home Insert Page Layout Formulas Data Review View X ! * Cut AutoSum Calibri 11 A A z Wrap Text General Normal Bad Good Ea Copy Fill- Paste B 1 U- A, a Merge & Center GP, % Calculation Conditional Format as Neutral Formatting Table Check Cell Insert Delete Format Format Painter Clear Sort & Find & Filter - Select Editing Clipboard Font Alignment Number Styles Cells 19 fx А B с D E F G H 1 1 2 3 4 =50/100 Sales 1750000 Direct materials 450000 Direct labour 400000 Manufacturing overhead - variable 420000 Manufacturing overhead - fixed 120000 16 Selling expenses-variable Selling expenses-fixed Administrative expenses - variable Administrative expenses-fixed =75/100 108000 54000 22000 71000 5 6 7 8 Break even point in units Units selling price Units variable costs Untis contribution margin Fixed costs Break even point in units Break even point in dollars =C2 =D18*H5/D13 =H5-16 =D24 =H8/H7 =H8/H7*H5 9 10 Contribution margin ratio Unit contribution margin Unit selling price Contribution margin ratio =H7 =H5 =H14/H15*100 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 WILDHORSE COMPANY CVP Income statement (Estimated) For the year Ending December 31,2020 Sales =C3 Variable expenses Cost of goods sold =C4+C5+C6 Selling expenses =E3 Administrative expenses =E5 Total variable expenses =C15+C16+C17 Contribution margin =D13-D18 Fixed expenses Cost of goods sold =C7 Selling expenses =E4 Administrative expenses =E6 Total fixed expenses =C21+C22+C23 Net Income =D19-D24 Margin of safety ratio Total sales Break even sales Margin of safety (dollars) Total sales Margin of safety ratio =D13 =H10 =H19-H20 =H19 =H21/H22*100 Target Income Fixed cost Contribution margin ratio Required sales dollars 200000 =D24 =H16% =(H26+H25)/H27 Varaible cost per bottle =D18*C2/D13 29 30 31 32 Sheet163 Sheet164 Sheet165 Sheet166 Sheet167 Sheet168 Sheet169 Sheet170 Sheet171 Sheet172 Sheet173 Ready W 100% U Type here to search 1 O 76% TT ») ENG 23:09 21-09-2020