Humphrey Company bottles and distributes No-FIZZ, a fruit drink. The bever? age is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 70 cents per bottle. For the year 2011, management estimates the following revenues and costs.
Net sales $2,000,000 Selling expenses-variable $ 80,000
Direct materials 290,000 Selling expenses-fixed 150,000
Direct labor 370,000 Administrative expenses-variable 40,000
Manufacturing overhead-
variable 220,000 Administrative expenses-fixed 40,000
Manufacturing overhead-
fixed 280,000
Instructions
(a)Prepare a CVP income statement for 2011 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.
(d)Determine the sales dollars required to earn net income of $390,000.