Reference no: EM132530719

Garnet bottles and distributes 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 2016, 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

Required:

Question a. How would you compute the breakeven points in units and in dollars?

Question b. How would you compute the contribution margin ratio and the margin of safety ratio?

Question c. How would you determine the sales dollars required to earn net income of $180,000?