Posted: June 17th, 2022

All frute company bottles and distributes frute ade, a fruit drink

P5-2B All Frute Company bottles and distributes Frute Ade, a fruit drink. The beverage is sold for $0.50 per 16-ounce bottle to retailers, who charge customers $0.70 per bottle. For the year 2014, management estimates the following revenues and costs:

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Net sales

$2,500,000

Selling expenses – Variable

$80,000

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Direct materials

360,000

Selling expenses – Fixed

250,000

Direct labor

450,000

Administrative expenses – Variable

40,000

Manufacturing overhead – Variable

270,000

Administrative expenses – Fixed

150,000

Manufacturing overhead – Fixed

380,000

 

 

 

Instructions:

(a) Prepare a CVP income statement for 2014 based on management’s estimates.

(b) Compute the break-even point in (1) units and (2) dollars.

(c) Compute the contribution margin ratio and the margin of safety ratio.

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