Problem 18-5A Viejol Corporation fixed), direct materials $500 000, direct labor
ID: 2336511 • Letter: P
Question
Problem 18-5A Viejol Corporation fixed), direct materials $500 000, direct labor $581,000 administrative expenses s272,000 20% variable and 80% fixed), a d manufacturing over ead S378 000 (70% vanable and 30% foed). Top management has asked you to do a CVP analysis so that it can make plans for the coming year it has projected that unit sales will increase by 10% next heat has conected the following information after its first year of sales. Sales were $2,000,000 on 100 000 units, selling expenses SSO 000 40% vanable and 60 Your answer is incorrect. Try again. Compute (1) the contribution margin for the current year and the projected year, and (2) the fixed costs for the current year. (Assume that fixed costs will remain the same in the projected year) (1) Contribution margin for current year 19000 Contribution margin for projected year (2) Fixed Costs K TO TEXT Your answer is incorrect. Try again compute the break-even point in units and sales dollars for the current year. (Round intermediate calculations to 2 decimal place. .g. 2.25 and Meal annen te places, e.g. 1,225.) Break-even point in units Break-even point in dollars INK TO TEXT Your answer is incorrect. Try again pany to meet its (Round answer to Odmimal place-e, L22s.) yhas a target net income of $212,000, what is the required sales in donors for the Sales dolilars required for target net income NK TO TEXT LINK TO TEXT 2000LINK TO TEXT Your answer is incorrect. Try again ir the company meets its target net income number, by what percentage could its saes answer to 1 decimal place, e.g. 10.5 Margin of safety ratio Click if you would like to Show Work for this questions Open Show warkExplanation / Answer
A. calculation of contribution margin for the current year and projected year
current period
amount ($)
[100,000 units]
per unit cost
($)
projected period
amount ($)
[110,000 units]
per unit cost
($)
* per unit costs are calculated by dividing the sales and cost values by the no. units
formulae of contribution margin is :
selling price per unit - variable cost per unit
B. calculation of break even point in units
calculation of total fixed costs
amount
$
formulae
total fixed costs / contribution margin
481,000 / 15.81
= 30423.78 units
Break even point in dollars
formulae
total fixed costs / profit volume ratio
i.e 481,000 / 0.7905
= 608,475.65 $
* formulae of profit volume ratio
contribution / sales
i.e 1,581,000 / 2,000,000
= 0.7905
C. calculation of requiered sales in dollars to meet its target net income of 212,000 $
formulae
total fixed cost + target income / profit volume ratio
481,000 + 212,000 / 0.7905
= 876,660.34 $
D. margin of safety ratio
formulae
margin of safety sales / total sales
1,391,524.35 / 2,000,000
= 0.6957 or 69.57 %
margin of safety ( in dollars)
formulae
actual sales - break even sales
2,000,000 $ - 608,475.65 $
=1,391,524.35 $
particularscurrent period
amount ($)
[100,000 units]
per unit cost
($)
projected period
amount ($)
[110,000 units]
per unit cost
($)
sales 2,000,000 20 2,200,000 20 less: variable manufacturing cost 264,600 2.646 291,060 2.646 less: variable administrative cost 54,400 0.544 59,840 0.544 less : variable selling cost 100,000 1 110,000 1 contribution margin 1,581,000 15.81 1,739,100 15.81