Prepare a CVP income statement based on management’s estimates

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

Subject: Business    / Accounting
Question
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    380,000

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.