Viejol Corporation has collected the following information afterits first year of sales. Sales were $1,600,000 on 100,000 units,selling expenses $250,000 (40% variable and 60% fixed), directmaterials $510,000, direct labor $290,600, administrative expenses$272,000 (20% variable and 80% fixed), and manufacturing overhead$350,000 (70% variable and 30% fixed). Top management has asked youto do a CVP analysis so that it can make plans for the coming year.It has projected that unit sales will increase by 10% nextyear.
(A) Compute (1) the contribution margin for the currentyear and the projected year, and (2) the fixed costs for thecurrent year. (Assume that fixed costs will remain the same in theprojected year.)
(B) Compute the break-even point in units and salesdollars for the current year. (Round intermediate calculations to 2decimal places e.g. 2.25 and final answers to 0 decimal places,e.g. 1,225.)
(C) The company has a target net income of $200,000.What is the required sales in dollars for the company to meet itstarget? (Round answer to 0 decimal places, e.g.1,225.)
(D) If the company meets its target net income number,by what percentage could its sales fall before it is operating at aloss? That is, what is its margin of safety ratio?
