Problem 19-5A (Part Level Submission) Viejol Corporation has collected the follo

Question

Problem 19-5A (Part Level Submission) Viejol Corporation has collected the following information after its first year of sales. Sales were $1,600,000 on 100,000 units, selling expenses $240,000 40% variable and 60% fixed direct material $514,000 direct labor $270 400 administrative expenses $282,000 (20% variable and 80% fixed), and manufacturing overhead $376,000 (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. 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 Contribution margin for projected year (2) Fixed Costs

Explanation / Answer

Variable Fixed Selling expenses 96000 144000 Direct materials 514000 Direct labor 270400 Administrative expenses 56400 225600 Manufacturing overhead 263200 112800 Total 1200000 482400 Contribution margin per unit=(1600000-1200000)/100000= $4 1 Contribution margin for current year 400000 =100000*4 Contribution margin for projected year 440000 =100000*1.1*4 2 Fixed costs $482400

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