Determine the sales dollars required to earn net income of $…
Hytek Company bottles and distributes Livit, a diet soft drink. The beverage is sold for 50 cents per 16-ounce bottle to retailers, who charge customers 75 cents per bottle. For the year 2012, management estimates the following revenues and costs.
Net sales
$1,800,000
Selling expenses—variable
$70,000
Direct materials
430,000
Selling expenses—fixed
65,000
Direct labor
352,000
Administrative expenses—
Manufacturing overhead—
variable
20,000
variable
316,000
Administrative expenses—
Manufacturing overhead—
fixed
60,000
fixed
283,000
Instructions
(a) Prepare a CVP income statement for 2012 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. (Round to full percents.)
(d) Determine the sales dollars required to earn net income of $238,000.
