Question

Good morning,

I am looking to get assistance on the correct way to solve the below accounting question i order to prepare for my midterm. Thank you for your help.

Problem 18-5A (Part Level Submission) Viejol Corporation has collected the following information after its first year of sales. Sales were $1,600,000 on 100,000 units, selling expenses $220,000 (40% variable and 60% fixed), direct materials $504,000, direct labor $306,000, administrative expenses $278,000 (20% variable and 80% fixed), and manufacturing overhead $352,000 (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. (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 LINK TO TEXT LINK TO TEXT LINK TO TEXT Attempts: 0 of 3 used SAVE FOR LATER SUBMIT ANSWER

Answer 1

a.

1.contribution margin for current year	400,000
contribution margin for projected year	440,000
2. Fixed costs	460,000

working:

contribution margin for current year :

first let us know, total variable and fixed costs:

	variable portion	fixed portion
selling expense	(220,000*40%)=>88,000	(220,000*60%)=>132,000
administrative expense	(278,000*20%)=>55,600	(278,000*80%)=>222,400
manufacturing overhead	(352,000*70%)=>246,400	(352,000*30%)=>105,600
total overhead	390,000	460,000 (answer for second part)

calculation of contribution margin for current year:

sales	1,600,000
less:direct materials	(504,000)
direct labor	(306,000)
variable overhead	(390,000)
contribution margin	400,000

contribution margin next year will be growing in proportion to sales:

=>400,000+10%

=>440,000.