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

Question

iejol Corporation has collected the following information after its first year of xed), direct materials $492,000, direct labor $27,900, 0% fixed). Top management has asked you to do a CVP analysis so that it can make plans for the coming year. It has sales. Sales were S1 250.00 on 12S 0 unt, seling e pe sesso oo 40, uratie ind 60 administrative expenses $272,000 (20% variable and 80% fixed), and manuf 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 (1) Contribution margin for current year s Contribution margin for projected years (2) Fixed Costs Click if you would like to Show Work for this question: Open Show Work

Explanation / Answer

SOLUTION

Current year costs-

1. Contribution margin for current year = Sales - Variable cost

= $1,250,000 - $937,500 = $312,500

Contribution margin for projected year =  ($1,250,000 * 110%) - ($937,500 * 110%)

= $1,375,000 - $1,031,250

= $343,750

2. Fixed costs = $480,400

Variable ($) Fixed ($) Selling Expenses ($250,000*40%), ($250,000*60%) 100,000 150,000 Direct Materials 492,000 Direct Labor 27,900 Administrative expenses ($272,000*20%), ($272,000*80%) 54,400 217,600 Manufacturing overhead ($376,000*70%), ($376,000*30%) 263,200 112,800 Total 937,500 480,400

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