P22-2A Utech Company bottles and distributes Livit, a diet soft drink. The bever
ID: 2357742 • Letter: P
Question
P22-2A Utech Company bottles and distributes Livit, 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 2012, management estimates the following revenues and costs. Net sales $1,800,000 Selling expenses-variable $70,000 Direct materials 430,000 Selling expenses-fixed 65,000 Direct labor 352,000 Administrative expenses-variable 20,000 Manufacturing overhead-variable 316,000 Administrative expenses-fixed 60,000 Manufacturing overhead-fixed 283,000 Determine the sales dollars required to earn net income of $238,000.Explanation / Answer
a. Prepare a CVP income statement for 2008 based on management's estimates.
(a) CM $612,000
NI $204,000
b. Compute the break-even point in (1) units and (2) dollars.
(b) (1) 2,400,000
(2) $1,200,000
c. Compute the contribution margin ratio and the margin of safety ratio. (Round to full percents.)
(c) contribution margin == CM 34%;
margin of safety ratio == MS 33%
d. Determine the sales dollars required to earn net income of $238,000.
(d) $1,900,000
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