Viejol Corporation has collected the following information after its first year of sales. Sales were $1,600,000...

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Accounting

Viejol Corporation has collected the following information afterits first year of sales. Sales were $1,600,000 on 100,000 units,selling expenses $200,000 (40% variable and 60% fixed), directmaterials $508,000, direct labor $290,400, administrative expenses$278,000 (20% variable and 80% fixed), and manufacturing overhead$380,000 (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.
If the company meets its target net income number, by whatpercentage could its sales fall before it is operating at a loss?That is, what is its margin of safety ratio?

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AnswerLet us do variable income statement for currentyearContribution margin ratio Contribution Sales 400000 1600000 25Breakeven point in dollar sales Fixed cost Contribution margin ratio 456400 25 1825600Next See Answer

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