Ask Question
11 September, 15:10

Wildhorse Corporation has collected the following information after its first year of sales. Sales were $1,250,000 on 125,000 units, selling expenses $250,000 (40% variable and 60% fixed), direct materials $496,000, direct labor $34,900, administrative expenses $280,000 (20% variable and 80% fixed), and manufacturing overhead $358,000 (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. Collapse question part (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.) (1) Contribution margin for current year $ Contribution margin for projected year $ (2) Fixed Costs

+2
Answers (2)
  1. 11 September, 15:23
    0
    1. Contribution margin for current year = $ 382,500

    Contribution margin for projected year = $ 420,750

    2. Fixed costs for current year - $ 451,400

    Explanation:

    Computation of fixed costs

    Fixed selling expenses (60 % of $ 250,000) $ 150,000

    Fixed administrative expenses (80 % of $ 280,000) $ 224,000

    Fixed manufacturing overhead (30 % of $ 358,000) $ 77,400

    Total Fixed costs $ 451,400

    Computation of variable costs and contribution margin for current year

    Direct Materials cost for current year $ 496,000

    Direct Labor costs for current year $ 34,900

    Variable selling expenses (40 % of $ 250,000) $ 100,000

    Variable administrative expenses (20 % of $ 280,000) $ 56,000

    Variable manufacturing overhead (70 % of $ 358,000) $ 180,600

    Total Variable costs for current year $ 867,500

    Contribution margin for current year =

    Sales Revenue - Variable costs

    $ 1,250,000 - $ 867,500 = $ 382,500

    Computation of variable costs and contribution margin for projected year

    Direct Material cost for projected year ($ 496,000 * 110 %) = $ 545,600

    Direct Labor costs for projected year ($ 34,900 * 110 %) = $ 38,390

    Variable selling expenses (110 % of $ 100,000) $ 110,000

    Variable administrative expenses (110 % of $ 56,000) $ 61,600

    Variable manufacturing overhead (110 % of $ 180,600) $ 198,660

    Total Variable costs for current year $ 954,250

    Contribution margin for current year =

    Sales Revenue - Variable costs

    $ 1,375,000 ($ 1,250,000 * 110 %) - $ 954,250 = $ 420,750
  2. 11 September, 15:40
    0
    Contribution Margin for current year $312,500

    Total Fixed Costs 481,400

    Contribution Margin for projected year $373,450

    Fixed Costs for the projected year will remain same 481,400

    Explanation:

    Wildhorse Corporation

    Sales $1,250,000

    Direct materials $496,000,

    Direct labor $34,900,

    Manufacturing overhead

    Variable (70%) of $358,000 = 250,600

    Manufacturing Margin 468,500

    Administrative expenses

    Variable (20%) of $280,000 = 56,000

    Selling expenses

    Variable (40%) of $250,000 = 100,00

    Total Variable Costs 910,500

    Contribution Margin for current year $312,500

    Total Fixed Costs 481,400

    Selling expenses

    Fixed 60% of,$250,000 = 150,00

    Administrative expenses

    Fixed 80% of $280,000 = 224,000

    Manufacturing overhead

    Fixed 30% of $358,000 = 107,400

    Wildhorse Corporation

    Sales $1, 375,000

    Costs / no of units = ($1,250,000/125,000 = $10 per unit)

    (125000+12500 = 137,500 units * units price = $ 10 = 13750,000)

    Total Variable Costs 910,500 for 125,000 units

    Unit Variable Costs = 910,500 / 125,000 units = $ 7.284

    Total variable costs for 137,500 units = $ 1001550

    Contribution Margin for projected year $373,450

    We calculate the total variable costs and get the unit variable costs by dividing with the number of units given. Now we multiply it with additional 10 % increase in the units to get the Contribution Margin for projected year.

    Fixed Costs for the projected year will remain same 481,400

    Selling expenses

    Fixed 60% of,$250,000 = 150,00

    Administrative expenses

    Fixed 80% of $280,000 = 224,000

    Manufacturing overhead

    Fixed 30% of $358,000 = 107,400
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Wildhorse Corporation has collected the following information after its first year of sales. Sales were $1,250,000 on 125,000 units, ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers