Subject: Business / Accounting
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:
Net sales $2,500,000 Selling expenses – Variable $80,000
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 380,000Instructions:(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.