Problem 18-5A (Part Level Submission) vi ol Corporation has collected the follow

Question

Problem 18-5A (Part Level Submission) vi ol Corporation has collected the following infor nation after its first year of sales. Sales were si 25 0 flixed), direct materials $492,000, direct labor $ 27,900, administrative ex as, o un s seling exp ses sas overheaed $378,00 ro% variatie and will increase by 10% next year 0 140 va e and 60% t has asked you to do a CVP analysis so that it can make plans for the coming year. It has projected that unit sales ed), and ? (a) Your answer is correct. 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.) 312500 (1) Contribution margin for current year Contribution margin for projected year (2) Fixed Costs Open Show Work Click if you would like to Show Work for this question: SHOW ANSWER SHOW SOLUTION TO TEXT Attempts: 1 of 3 used

Explanation / Answer

(a)

(1)

Contribution margin percenatge = (Sales - Variable expenses) / sales

= (1,250,000 - 937,500) / 1,250,000

= 25%

Contribution margin = Sales * Contribution margin percentage

(2)

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(b)

Contribution margin per unit = Contribution margin / Number of units

= 312,500 / 125,000

= 2.5

Breakeven point in units = Fixed costs / Contribution margin per unit

Breakeven point in dollars = Fixed costs / Contribution margin percentage

Variable Fixed Selling expenses 100,000 (250,000*40%) 150,000 (250,000*60%) Direct materials 492,000 Direct labour 27,900 Administrative expenses 54,400 (272,000*20%) 217,600 (272,000*80%) Manufacturing overhead 263,200 (376,000*70%) 112,800 (376,000*30%) Total 937,500 480,400

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