Problem 1:
Jorge Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 78 cents per bottle. For the year 2014, management estimates the following revenues and costs.(a) Prepare a CVP income statement for 2014 based on management's estimates.
|
Sales
|
$1,807,700
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Selling expenses-variable
|
$68,000
|
|
Direct materials
|
429,500
|
Selling expenses-fixed
|
66,400
|
|
Direct labor
|
357,100
|
Administrative expenses-variable
|
24,782
|
|
Manufacturing overhead-variable
|
313,700
|
Administrative expenses-fixed
|
60,500
|
|
Manufacturing overhead-fixed
|
285,100
|
|
|
(b) Calculate variable cost per bottle.
(c) Compute the break-even point in (1) units and (2) dollars.
(d) Compute the contribution margin ratio and the margin of safety ratio.
Problem 2:
PCB Corporation manufactures a single product. Monthly production costs incurred in the manufacturing process are shown below for the production of 3,540 units. The utilities and maintenance costs are mixed costs. The fixed portions of these costs are $354 and $236, respectively.
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Production in Units
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3,540
|
|
Production Costs
|
|
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Direct materials
|
$8,850
|
|
Direct labor
|
17,700
|
|
Utilities
|
2,124
|
|
Property taxes
|
1,180
|
|
Indirect labor
|
5,310
|
|
Supervisory salaries
|
2,124
|
|
Maintenance
|
1,298
|
|
Depreciation
|
2,832
|
(a) Identify the above costs as variable, fixed, or mixed.
(b) Calculate variable costs per unit, variable cost per unit for utilities and variable cost per unit for maintenance.
(c) Calculate the expected costs when production is 5,900 units.
Problem 3:
Lorge Corporation has collected the following information after its first year of sales. Sales were $2,339,200 on 146,200 units; selling expenses $350,880 (40% variable and 60% fixed); direct materials $747,082; direct labor $416,670; administrative expenses $409,360 (20% variable and 80% fixed); manufacturing overhead $526,320 (70% variable and 30% fixed). Top management has asked you to do a CVP analysis so that it can make plans for the coming year. It has projected that unit sales will increase by 10% next year.
(a) Compute the contribution margin for the current year and the projected year, and (2) the fixed costs for the current year
(b) Compute the break-even point in units and sales dollars for the first year.
(c) The company has a target net income of $453,220. What is the required sales in dollars for the company to meet its target?
(d) If the company meets its target net income number, by what percentage could its sales fall before it is operating at a loss? That is, what is its margin of safety ratio?