Question

Jorge 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 90 cents per bottle. For the year 2017, management estimates the following revenues and costs.

Sales		$2,220,000		Selling expenses—variable		$60,000
Direct materials		470,000		Selling expenses—fixed		50,000
Direct labor		300,000		Administrative expenses—variable		62,000
Manufacturing overhead—variable		440,000		Administrative expenses—fixed		50,000
Manufacturing overhead—fixed		579,200

A)Calculate variable cost per bottle

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

C)Compute the contribution margin ratio and the margin of safety ratio.

Answer 1

Answers :

A) Variable cost per bottle = 36 Cents per bottle

B) Break even point in units = 2,830,000 units : Break even dollars = $1,698,000

C) Contribution margin ratio = 40% : Margin of safety ratio = 23.5%