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 materials $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. ? (c) The company has a target net income of $216,000. What is the required sales in dollars for the company to meet its target? (Round answer to O decimal places, e.g. 1,225.) Sales dollars required for target net income LINK TO TEXT LINK TO TEXT LINK TO TEXT

Explanation / Answer

(c) The company has a target net income of $216000. What is the required sales in dollars for the company to meet its target?

= (Fixed Costs + Target Profit ) / Contribution Ratio

= ($482400 + $216000 ) / 0.25

= $27,93,600

“Sales dollars required for target net income = $27,93,600 “

Workings

Sales           = $16,00,000

Variable cost =$514000+$270400+($240000*0.40)+ ($282000*0.20)+ ($376000*0.70) = $12,00,000

Fixed Costs = $4,82,400

Contribution per unit = ($16,00,000 - $12,00,000 ) / 1,00,000 units

= $4 per unit

Selling price = $16 per unit    

Contribution Ratio = $4/$16 = 25%

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