Compute the break-even point in units and sales dollars

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Mozena Corporation has collected the following information after its first year of sales. Sales were $1,762,500 on 117,500 units; selling expenses $267,500 (42% variable and 58% fixed); direct materials $528,500; direct labor $307,500; administrative expenses $287,500 (22% variable and 78% fixed); manufacturing overhead $367,500 (72% variable and 28% 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.

Instructions:

(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.)

(b) Compute the break-even point in units and sales dollars for the current year.

(c) The company has a target net income of $200,000. What is the required sale in dollars for the company to meet its target? (Please answer this with details)

 

(d) If the company meets its target net income number, by what percentage could its sales fall before it is operating at a loss? That is, what is its margin of safety ratio?

Reference no: EM13755585

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Compute the break-even point in units and sales dollars : Mozena Corporation has collected the following information after its first year of sales. Sales were $1,762,500 on 117,500 units; selling expenses $267,500 (42% variable and 58% fixed); direct materials $528,500; direct labor $307,500; Compute the br..
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