Lorge Corporation has collected the following information after its first year o

Question

Lorge Corporation has collected the following information after its first year of sales. Sales were $2,377,600 on 148,600 units; selling expenses $356,640 (40% variable and 60% fixed); direct materials $759,346; direct labor $423,510; administrative expenses $416,080 (20% variable and 80% fixed); manufacturing overhead $534,960 (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 (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.)

there's a part b and c

(1) Contribution margin for current year $ Contribution margin for projected year $ (2) Fixed costs for current year $

Large Corporation has collected the following information after its first year of sales. Sales were $2,377,600 on 148,600 units; selling expenses $356,640 (40% variable and 60% fixed); direct materials $759,346; direct labor $423,510; administrative expenses $416,080 (20% variable and 80% fixed); manufacturing overhead $534,960 (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 (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.)

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

Part B:

Part C:

Fixed Cost = 534960*30% (Manufacturing Overhead) + 416080*80% (Administrative Expenses) + 356640*60% (Selling Expenses) = 707336.

Thanks.

Amount Sales 2377600 Less
Direct Materials 759346 Direct Labor 423510 Manufacturing Overhead (534960*70%) 374472 Administrative Expenses (416080*20%) 83216 Selling Expenses (356640*40%) 142656 Contribution Margin for Current Year 594400

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