ASSIGNMENT RESOURCES Chapter 06 Problem 6-2A (Video) (Part Level Submission) Problem 6-2A (Video) Problem 6-2A (Video) (Part Level Submission) Lorge Corporation has collected the following information after its first year of sales. Sales were $2,500,000 on 100,000 units; selling expenses $250,000 (40% variable and 60% fixed); direct materials $1,321,200; direct labor $270,000; administrative expenses $270,000 (20% variable and 80% fixed); and manufacturing overhead $364,000 (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. Review Score Review Results by Study Objective (a) Your answer is correct. 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 500,000 Contribution margin for projected year T 550,000 (2) Fixed costs for current year 475200 Click if you would like to Show Work for this question: Open Show Work SHOW SOLUTION LINK TO TEXT VIDEO: SIMILAR PROBLEM Attempts: 3 of 15 used Your answer is correct. Compute the break-even point in units and sales dollars for the first year. (Round contribution margin ratio to 1 decimal place e.g. 0.5 and final answers to o decimal places, e.g. 2,510.) Break-even point 95040 units Break-even point 2,376,000 Click if you would like to Show Work for this question: Open Show Work SHOW SOLUTION LINK TO TEXT VIDEO: SIMILAR PROBLEM Attempts: 4 of 15 used The company has a target net income of $180,000. What is the required sales in dollars for the company to meet its target? ASSIGNMENT RESOURCES Chapter 06 Problem 6-2A (Video) (Part Level Submission) Problem 6-2A (Video) Sales dollars required for target net income 3,275,000 Click if you would like to Show Work for this question: Open Show Work Review Score Review Results by Study Objective SHOW SOLUTION LINK TO TEXT VIDEO: SIMILAR PROBLEM Attempts: 1 of 15 used (d) Your answer is correct. 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? (Round answer to 1 decimal place, e.g. 10.5%.) Margin of safety ratio 27.5% Click if you would like to Show Work for this question: Open Show Work SHOW SOLUTION LINK TO TEXT VIDEO: SIMILAR PROBLEM Attempts: 2 of 15 used * Your answer is incorrect. Try again. The company is considering a purchase of equipment that would reduce its direct labor costs by $110,000 and would change its manufacturing overhead costs to 30% variable and 70% fixed (assume total manufacturing overhead cost is $364,000, as above). It is also considering switching to a pure commission basis for its sales staff. This would change selling expenses to 90% variable and 10% fixed (assume total selling expense is $250,000, as above). Compute (1) the contribution margin and (2) the contribution margin ratio, and recompute (3) the break-even point in sales dollars. (Round contribution margin ratio to 4 decimal places, e.g. 0.2527 and all other answers to o decimal places, e.g. 2,520. Use the current year numbers for calculations.) 1. Contribution margin J 2369400 X 2. Contribution margin ratio 3. Break-even point