Sheridan Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for 60 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 $1,980,000 Selling expenses—variable $79,000Direct materials 500,000 Selling expenses—fixed 56,000Direct labor 380,000 Administrative expenses—variable 27,000Manufacturing overhead—variable 400,000 Administrative expenses—fixed 179,500Manufacturing overhead—fixed 210,000 (A) Compute the contribution margin ratio and the margin of safety ratio. (Round variable cost per bottle to 3 decimal places, e.g. 0.25 and final answers to 0 decimal places, e.g. 25%.)Contribution margin ratio enter the contribution margin ratio in percentages rounded to 0 decimal places %Margin of safety ratio enter the Margin of safety ratio in percentages rounded to 0 decimal places %(B) Determine the sales dollars required to earn net income of $150,000. (Round answer to 0 decimal places, e.g. 1,225.)Required sales dollars $enter the Required sales dollars

Contribution Margin ratio is the ratio of contribution margin to sales. Contribution margin is…

Answered: margin ratio enter the contribution…

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 6CE

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Sheridan Company bottles and distributes B-Lite, a diet soft drink. The beverage is sold for 60 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	$1,980,000	Selling expenses—variable	$79,000
Direct materials	500,000	Selling expenses—fixed	56,000
Direct labor	380,000	Administrative expenses—variable	27,000
Manufacturing overhead—variable	400,000	Administrative expenses—fixed	179,500
Manufacturing overhead—fixed	210,000

(A) Compute the contribution margin ratio and the margin of safety ratio. (Round variable cost per bottle to 3 decimal places, e.g. 0.25 and final answers to 0 decimal places, e.g. 25%.)

Contribution margin ratio		enter the contribution margin ratio in percentages rounded to 0 decimal places	%
Margin of safety ratio		enter the Margin of safety ratio in percentages rounded to 0 decimal places	%

(B) Determine the sales dollars required to earn net income of $150,000. (Round answer to 0 decimal places, e.g. 1,225.)

Required sales dollars

$enter the Required sales dollars

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