Williams Company bottles and distributes Supe Juice, a 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 2020, 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—variable: 20,000 Manufacturing overhead—variable: 380,000 Administrative expenses—fixed: 60,000 Manufacturing overhead—fixed: 280,000 Prepare a CVP income statement for 2020 based on management’s estimates. Calculate variable cost per bottle. Compute the break-even point in units. Compute the break-even point in dollars. Compute the contribution margin ratio. Compute the margin of safety ratio. Determine the sales dollars required to earn net income of $180,000.
Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
Williams Company bottles and distributes Supe Juice, a 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 2020, 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—variable: 20,000
Manufacturing overhead—variable: 380,000
Administrative expenses—fixed: 60,000
Manufacturing overhead—fixed: 280,000
Prepare a CVP income statement for 2020 based on management’s estimates.
Calculate variable cost per bottle.
Compute the break-even point in units.
Compute the break-even point in dollars.
Compute the contribution margin ratio.
Compute the margin of safety ratio.
Determine the sales dollars required to earn net income of $180,000.
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