Question

4-52 Review of Chapters 2, 3, and 4 Kyu Lee Corporation provides you with the following miscellaneous data regarding operations for 20X0 (in thousands of South Korean won, w): Break-even point in sales W 84,000 Direct material used 29,000 Gross profit Contribution margin 20,000 25,000 30,000 Direct labor 100,000 Sales 5,000 Variable manufacturing overhead There are no beginning or ending inventories. Compute (a) the fixed manufacturing overhead, (b) variable selling and administrative expenses, and (c) fixed selling and administrative expenses.

Answer 1

a.

Cost of goods sold = Direct material+direct labor+variable manufacturing overhead+Fixed manufacturing overhead

Cost of goods sold = Sales - Gross profit

Cost of goods sold = 100,000 - 20,000 = 80,000

$80,000 = 29,000+30,000+5,000+Fixed manufacturing overhead

Fixed manufacturing overhead = 80,000-29,000-30,000-5,000 = 16,000

b.

Contribution margin = Sales - Total variable cost

Total variable cost = $100,000 - 25,000 = $75,000

Variable selling and administrative expenses = $75,000 - 5,000 = $70,000

c.

Break even point in sales = Total fixed cost / Contribution margin ratio

Contribution margin ratio = Contribution/sales*100

Contribution margin ratio = $25,000/100,000*100 = 25%

Total fixed cost = 84,000*25% = 21,000

Fixed selling and administrative expenses = 21,000-16,000 = 5,000