Problem 6-2A Lorge Corporation has collected the following information after its
ID: 2405161 • Letter: P
Question
Problem 6-2A
Lorge Corporation has collected the following information after its first year of sales. Sales were $2,500,000 on 100,000 units; selling expenses $250,000 (40% variable and 60% fixed); direct materials $1,351,000; direct labor $250,000; administrative expenses $270,000 (20% variable and 80% fixed); and manufacturing overhead $350,000 (70% variable and 30% fixed). 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 year.
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Problem 6-2A
Lorge Corporation has collected the following information after its first year of sales. Sales were $2,500,000 on 100,000 units; selling expenses $250,000 (40% variable and 60% fixed); direct materials $1,351,000; direct labor $250,000; administrative expenses $270,000 (20% variable and 80% fixed); and manufacturing overhead $350,000 (70% variable and 30% fixed). 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 year.
Explanation / Answer
As per chegg guidelines we answer one question per post. Kindly post remaining questions in next post Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Current Year Projected Year Sales 2,500,000.00 2,750,000.00 Less Variable Expenses Selling expenses 100,000.00 110,000.00 Direct materials 1,351,000.00 1,486,100.00 Direct Labor 250,000.00 275,000.00 Admin Expenses 54,000.00 59,400.00 Manufacturing overhead 245,000.00 269,500.00 Total Variable costs 2,000,000.00 2,200,000.00 Contribution Margin 500,000.00 550,000.00 Fixed cost Selling expenses 150,000.00 150,000.00 Admin Expenses 216,000.00 216,000.00 Manufacturing overhead 105,000.00 105,000.00 Fixed costs 471,000.00 471,000.00 Net operating income 29,000.00 79,000.00 Contribution Margin ratio = Cont/Sales 0.20 BEP in $ = 471,000/.20 2,355,000.00 BEP in units = 2355,000/25 94,200.00 Required sales for income of 160,000 = (471,000 + 160,000)/20% 3,155,000.00 MOS Ratio = (3155,000-2355,000)/3155,000 25.36%