Problem 185A Part Level Submission Viejol Corporation has co

Problem 18-5A (Part Level Submission)

Viejol Corporation has collected the following information after its first year of sales. Sales were $1,250,000 on 125,000 units, selling expenses $230,000 (40% variable and 60% fixed), direct materials $494,000, direct labor $32,100, administrative expenses $274,000 (20% variable and 80% fixed), and manufacturing overhead $378,000 (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.

(a)

Problem 18-5A (Part Level Submission) Viejol Corporation has collected the following information after its first year of sales. Sales were $1,250,000 on 125,000 units, selling expenses $230,000 (40% variable and 60% fixed), direct materials $494,000, direct labor $32,100, administrative expenses $274,000 (20% variable and 80% fixed), and manufacturing overhead $378,000 (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.

Solution

Variable fixed direct materials 494,000 direct labor 32,100 manufacturing overhead 264600 113400 Administrative expense 54800 219200 Selling expense 92000 138000 total variable expense 937,500 7.5 total fixed expense 470600 contribution margin ratio (10-7.5)/10 25% q) 1) Contribution margin for current year sales 1,250,000 less variable expense 937,500 Contribution margin for current year 312,500 contribution margin for projected year (312500*110%) 343750 2) Fixed cost 470600