Tyson Company bottles and distributes NO-KAL, a diet soft drink.

The beverage
is sold for 40 cents per 16-ounce bottle to retailers, who charge customers 60
cents per bottle. At full (100%) plant capacity, management estimates the
following revenues and costs.
Net Sales
$1,800,000
Direct Materials
400,000
Direct Labor
280,000
Manufacturing overhead-variable
300,000
Manufacturing overhead-fixed
283,000

Selling expense-variable
Selling expense-fixed
Administrative expense-variable
Administrative expense-fixed

$80,000
65,000
20,000
52,000

Instructions
(a) Prepare a CVP income statement for 2015 based on the managers 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 required to earn net income of $150,000

TYSON COMPANY
CVP Income Statement (Estimated)
For the Year Ending December 31, 2015
Net sales.........................................................
$1,800,000
Variable expenses
Cost of goods sold................................
Selling expenses....................................
Administrative expenses.......................
Total variable expenses.................
1,080,000
Contribution margin......................................
720,000
Fixed expenses
Cost of goods sold................................
Selling expenses....................................
Administrative expenses.......................
Total fixed expenses......................
400,000
Net income.....................................................
320,000

100%
$980,000*
80,000
20,000
60%
40%
283,000
65,000
52,000

*Direct materials $400,000 + direct labor $280,000 + variable

manufacturing overhead $300,000.
(b) Variable costs = 60% of sales ($1,080,000 $1,800,000) or
$.24 per bottle ($.40 X 60%). Total fixed costs = $400,000.
.40-.24 = .16 cm per unit
(1) FC/CMper unit 400,000/.16
= 2,500,000 units
(2) 2,500,000 X $.40 = or FC/CM% 400,000/40% = $1,000,000
(c) Contribution margin ratio = CMper unit/selling price($.40
$.24) $.40
= 40%
Margin of safety ratio
= actual sales breakeven sales
dollars ($1,800,000 $1,000,000) $1,800,000
= 44% (rounded)
(d) FC + Target profit/CM%
400,000+150,000/.40
=
$1,375,000