Pharoah 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 | $1,800,000 | Selling expenses—variable | $93,000 | |||
---|---|---|---|---|---|---|
Direct materials | 410,000 | Selling expenses—fixed | 65,000 | |||
Direct labor | 400,000 | Administrative expenses—variable | 27,000 | |||
Manufacturing overhead—variable | 420,000 | Administrative expenses—fixed | 55,000 | |||
Manufacturing overhead—fixed | 150,000 |
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 0 decimal places, e.g. 1,225.)
(1) |
Compute the break-even point |
|
(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. 0.25 and final answers to 0 decimal places, e.g. 25%.)
Contribution margin ratio |
Margin of safety ratio |
Answer 1 | |
Manufacturing overhead—fixed | $150,000 |
Selling expenses—fixed | $65,000 |
Administrative expenses—fixed | $55,000 |
Total fixed expenses | $270,000 |
Direct materials | $410,000 |
Direct labor | $400,000 |
Manufacturing overhead—variable | $420,000 |
Selling expenses—variable | $93,000 |
Administrative expenses—variable | $27,000 |
Total variable costs | $1,350,000 |
Divided by: Units sold (1800000/0.60) | 3,000,000 |
Variable cost per bottle | $0.45 |
Answer 2 | ||
Selling price per bottle | $0.60 | |
Less: | Variable cost per bottle | $0.45 |
Contribution margin per bottle | $0.15 | |
Total fixed expenses | $270,000 | |
Divided by: | Contribution margin per bottle | $0.15 |
Break-even point in units | 1,800,000 | |
Contribution margin per bottle | $0.15 | |
Divided by: | Selling price per bottle | $0.60 |
Contribution margin ratio | 25.00% | |
Total fixed expenses | $270,000 | |
Divided by: | Contribution margin ratio | 25.0% |
Break-even point in value | $1,080,000 |
Sales revenue | $1,800,000 | |
Less: | Break-even point in value | $1,080,000 |
Margin of safety in value | $720,000 | |
Divided by: | Sales revenue | $1,800,000 |
Margin of safety ratio | 40.00% |
Pharoah Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for 60...
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