Mozena Corporation has collected the following information after its first year

Question

Mozena Corporation has collected the following information after its first year of sales. Sales were $2,000,000 on 100,000 units; selling expenses $242,000 (40% variable and 60% fixed); direct materials $511,600; direct labor $488,140; administrative expenses $276,200 (20% variable and 80% fixed); manufacturing overhead $354,600 (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 the contribution margin for the current year and the projected year, and the fixed costs for the current year. (Assume that fixed costs will remain the same in the projected year.) Contribution margin for current year $ Contribution margin for projected year $ Fixed Costs $

Explanation / Answer

selling price per unit = 2,000,000 / 100,000 = $ 20per unit

1)contribution margin = sales - variable cost

                                = 2,000,0000 - 1,400,000

                                = 600,000

2)Units sold = 100000 ( 1+ .1) = 100000*1.1

                         = 110000 units

contribution margin = 110000 ( 20 -14)

                             = 110000 * 6

                             =$ 660000

2)Fixed csot = $472540

Fixed cost Variable cost selling expenses 145200    [242000*.60] 96800       [242000*.40] Direct material 511600 Direct labor 488140 Administration expense 220960     [276200*.80] 55240        [276200*.20] Manufacturing overhead 106380      [354600*.30] 248220       [354600*.70] Total cost 472540 1400000 or (1400000/100000) = $ 14 per unit

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