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 $1,800,000 on 100,000 units; selling expenses $243,300 (40% variable and 60% fixed); direct materials $512,400; direct labor $346,110; administrative expenses $284,300 (20% variable and 80% fixed); manufacturing overhead $353,300 (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.

Problem 18-5A (Part Level Submission) Mozena Corporation has collected the following information after its first year of sales. Sales were $1,800,000 on 100,000 units; selling expenses $243 300 40% vanable and 60% fixed d ect materials $512,400; direct labor $346,110; administrative expenses $284,300 20% variable and 80% fixed ; manufacturing overhead $353 300 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) 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 Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

CVC Analysis 18 Sales Revenue 1800000 100000 units Total Price/Cost per unit = Cost / Number of unit Variable Fixed Total Variable Fixed Total Selling Expenses ( 40% variable , 60% fixed) 97320 145980 243300 0.97 1.46 2.43 Direct Material 512400 512400 5.12 0.00 5.12 Direct Labor 346110 346110 3.46 0.00 3.46 Administrative expenses ( 20% variable, 80% fixed) 56860 227440 284300 0.57 2.27 2.84 Manufacturing overheads (70% varable , 30% fixed) 247310 105990 353300 2.47 1.06 3.53 Total Cost 1260000 479410 1739410 12.60 4.79 17.39 a) 1) Contribution Margin ( Refer working above) 100000 Total Total (Projected) Price/Cost per unit 100000 110000 Selling Price ( A) 18.00 1800000 1980000 Less : Variable Expenses         Direct Material 5.12 512400 563640          Direct Labor 3.46 346110 380721         Manufacturing Overheads 2.47 247310 272041         Administrative expenses 5.12 512400 563640         Selling Expenses 0.97 97320 107052 Total Variable Cost (B) 17.16 1715540 1887094 Contribution Margin ( A - B) 0.84 84460 92906 a) 2) Fixed cost for the current and projected year = 479410 (refer working above)

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