Lorge Corporation has collected the following information after its first year of sales. Sales were $1,600,000 on 80,000 units; selling expenses $250,000 (40% variable and 60% fixed); direct materials $620,800; direct labor $270,000; administrative expenses $270,000 (20% variable and 80% fixed); and manufacturing overhead $336,000 (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.
. 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 $Entry field with incorrect answer now contains modified data Contribution margin for projected year $Entry field with incorrect answer (2) Fixed costs for current year $Entry field with incorrect answer
(1) Contribution margin for current year
| Current Year Cost | Variable | Fixed | Total |
| Selling Expenses | 100000 | 150,000 | 250,000 |
| Direct Materials | 620800 | 620800 | |
| Direct Labor | 270,000 | 270000 | |
| Admin. Expenses | 54000 | 216,000 | 270,000 |
| Mfg. Overhead | 235200 | 100,800 | 336000 |
| Total | 1,280,000 | 466,800 | 1,746,800 |
Calculation for current year contribution margin
| particular | Amount in $ 80,000 units |
Per Ubits |
| Sales | 1600000 | 20 |
| Less: | ||
| Variable Cost | 1,280,000 | 16 |
| Contribution Margin | 320,000 | 4 |
| Less: | ||
| Fixed Cost | 466,800 | |
| Net Profit | -146,800 |
CVP analysis so that it can make plans for the coming year. It has projected that unit sales will increase by 10% next year
| particular | Amount in $ 88,000 units |
Per Ubits |
| Sales | 1760000 | 20 |
| Less: | ||
| Variable Cost | 1,408,000 | 16 |
| Contribution Margin | 352,000 | 4 |
| Less: | ||
| Fixed Cost | 466,800 | |
| Net Profit | -114,800 |
