Determine the sales dollars required to earn net income of $238,000.

Hytek Company bottles and distributes Livit, 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 2012, management estimates the following revenues and costs.

Net sales

$1,800,000

Selling expenses—variable

$70,000

Direct materials

430,000

Selling expenses—fixed

65,000

Direct labor

352,000

Administrative expenses—

Manufacturing overhead—

variable

20,000

variable

316,000

Administrative expenses—

Manufacturing overhead—

fixed

60,000

fixed

283,000

Instructions

(a) Prepare a CVP income statement for 2012 based on management’s 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 dollars required to earn net income of $238,000.