Question

iejol Corporation has collected the following information after its first year of sales. Sales were $1,200,000...

iejol Corporation has collected the following information after its first year of sales. Sales were $1,200,000 on 100,000 units, selling expenses $210,000 (40% variable and 60% fixed), direct materials $492,000, direct labor $21,000, administrative expenses $276,000 (20% variable and 80% fixed), and manufacturing overhead $354,000 (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.

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Answer #1

1. Contribution Margin = Revenue - Variable Cost

= 1,200,000 - (210,000 *40%)- 492,000 - 21,000- (276,000*20%)- (354,000*70%)

= 300,000

Projected year= 10%

Contribution margin = (1,200,000*110%) - (210,000 *40%*110%)- (492,000*110%) - (21,000*110%)- (276,000*20%*110%)- (354,000*70%*110%)

= 330000

Fixed cost (first year) = (210,000 *60%) + (276,000*80%) +(354,000*30%) = 453000

PART SECOND

Contribution margin in percentage = contribution /sales*100 = 330000/1320000 = 25%

Break even ($) = Fixed cost /contribution

= 453000 / 0.25

=$1812000

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