Kimmel, Accounting, 6e CALCULATOR PRINTER VERSION BACK Problem 18-5A (Part Level
ID: 2568628 • Letter: K
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Kimmel, Accounting, 6e CALCULATOR PRINTER VERSION BACK Problem 18-5A (Part Level Submission) Viejol Corporation has collected the following information after its first year of sales $1,600,000 on 100,000 units, selling expenses $250,000 40% variable and 60% fixed), dire direct labor $288 $350,000 (70% variable and 30% fixed). Top management has asked you to do a CVP analys s so that it can make plans for the coming year. It has projected that unit sales will increase by 10% next year. materials $510,000 18-2 ubmission (Part sion e 18-6 ,200, administrative expenses $284,000 (20% variable and 80% fixed , and manufacturing overhead (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.) ssion) ssion) (1) Contribution margin for current year SA (Par Contribution margin for projected years (2) Fixed Costs Click if you would like to Show Work for this question: lts by ive Open Show Work LINK TO TEXT LINK TO TEXT LINK TO TEXT Attempts: 0 of 3 used SAVE FOR LATER SUBMET ANSWERExplanation / Answer
Sales = $1,600,000
Variable Costs = $1,200,000
Number of units sold = 100,000
Fixed Costs = $482,200
Selling Price = Sales / Number of units sold
Selling Price = $1,600,000 / 100,000
Selling Price = $16.00
Variable Cost per unit = Variable Costs / Number of units sold
Variable Cost per unit = $1,200,000 / 100,000
Variable Cost per unit = $12.00
Contribution Margin Ratio = (Selling Price - Variable Cost per unit) / Selling Price
Contribution Margin Ratio = ($16.00 - $12.00) / $16.00
Contribution Margin Ratio = 25%
Break-even Point in dollar sales = Fixed Costs / Contribution Margin Ratio
Break-even Point in dollar sales = $482,200 / 25%
Break-even Point in dollar sales = $1,928,800
Sales required to meet Target Net Income = (Fixed Costs + Target Net Income) / Contribution Margin Ratio
Sales required to meet Target Net Income = ($482,200 + $204,000) / 25%
Sales required to meet Target Net Income = $686,200 / 25%
Sales required to meet Target Net Income = $2,744,800
Margin of Safety Ratio = (Sales - Break-even Point in dollar sales) / Sales
Margin of Safety Ratio = ($2,744,800 - $1,928,800) / $2,744,800
Margin of Safety Ratio = 29.73%
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