P5-2A 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 75 cents per bottle. For the year 2014, management estimates the following revenues and costs.

Sales                                                   $1,800,000          Selling expenses—variable        $70,000 Direct materials                                                                        430,000          Selling expenses—fixed                         65,000

Direct labor                                            360,000         Administrative expenses—

Manufacturing overhead—                                               variable                                           20,000 variable           380,000                                                              Administrative  expenses—

Manufacturing overhead—                                               fixed                                                 60,000 fixed 280,000

Instructions

(a)  Prepare a CVP income statement for 2014 based on management’s estimates. (Show column for total amounts only.)

(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 nearest full percent.)

(d)  Determine the sales dollars required to earn net income of $180,000.