Viejol Corporation has collected the following information after its first year
ID: 2399821 • Letter: V
Question
Viejol Corporation has collected the following information after its first year of sales. Sales were $1,250,000 on 125,000 units, selling expenses $240,000 (40% variable and 60% fixed), direct materials $512,000, direct labor $20,900, administrative expenses $276,000 (20% variable and 80% fixed), and manufacturing overhead $362,000 (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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Viejol Corporation has collected the following information after its first year of sales. Sales were $1,250,000 on 125,000 units, selling expenses $240,000 (40% variable and 60% fixed), direct materials $512,000, direct labor $20,900, administrative expenses $276,000 (20% variable and 80% fixed), and manufacturing overhead $362,000 (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
Answers
Total
Variable cost
Variable cost per unit
Fixed Cost
[A]
[B = A x given % for variable cost]
[C = B / 125,000 units]
[D = A – B]
Selling Expenses
$ 240,000.00
$ 96,000.00
$ 0.77
$ 144,000.00
Direct Materials
$ 512,000.00
$ 512,000.00
$ 4.10
$ -
Direct Labor
$ 20,900.00
$ 20,900.00
$ 0.17
$ -
Administrative expenses
$ 276,000.00
$ 55,200.00
$ 0.44
$ 220,800.00
Manufacturing Overhead
$ 362,000.00
$ 253,400.00
$ 2.03
Total
$ 1,410,900.00
$ 937,500.00
$ 7.50
$ 364,800.00
Working
Current Year
Projected Year
A
Sales Revenue
$ 1,250,000.00
$ 1,375,000.00
B
Variable cost
$ 937,500.00
$ 1,031,250.00
C=A - B
Contribution Margin
$ 312,500.00
$ 343,750.00
D [calculated above]
Fixed Cost
$ 364,800.00
A [calculated in workings]
Fixed Cost
$ 364,800.00
B
Sale Price per unit
$ 10.00
C [calculated in workings]
Unit Variable cost
$ 7.50
D = B - C
Unit Contribution margin
$ 2.50
E = A/D
Break Even Point in Units
145,920
F = E x B
Break Even point in dollars
$ 1,459,200.00
A
Target Net Income
$ 216,000.00
B
Fixed Cost
$ 364,800.00
C=A+B
Total Contribution margin required
$ 580,800.00
D
Unit Contribution margin
$ 2.50
E=C/D
Units to be sold to earn target income
232,320
F=E x $10 sale price
Sales dollars required for target net income
$ 2,323,200.00
A [calculated above]
Sales dollars required for target net income
$ 2,323,200.00
B [calculated above]
Break Even point in dollars
$ 1,459,200.00
C = A - B
Margin of Safety Sales dollars
$ 864,000.00
D = (C/A) x 100
Margin of Safety Ratio
37.2%
Total
Variable cost
Variable cost per unit
Fixed Cost
[A]
[B = A x given % for variable cost]
[C = B / 125,000 units]
[D = A – B]
Selling Expenses
$ 240,000.00
$ 96,000.00
$ 0.77
$ 144,000.00
Direct Materials
$ 512,000.00
$ 512,000.00
$ 4.10
$ -
Direct Labor
$ 20,900.00
$ 20,900.00
$ 0.17
$ -
Administrative expenses
$ 276,000.00
$ 55,200.00
$ 0.44
$ 220,800.00
Manufacturing Overhead
$ 362,000.00
$ 253,400.00
$ 2.03
Total
$ 1,410,900.00
$ 937,500.00
$ 7.50
$ 364,800.00
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