Mortonsen has collected the following information after its first year of sales Net sales were RM2,000,000 on 100,000 units selling expenses RM400,000 (30 variable and 70 fixed) direct materials RM600,000 direct labor RM340,000 administrative expenses RM500,000 (30 variable and 70 fixed) manufacturing overhead RM480,000 (20 variable and 80 fixed) The 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 20 next year Required Compute The contribution margin for the current year and the projected year (4 marks) The fixed costs for the current year (Assume that fixed costs will remain the same in the projected year (2 marks) 3 Compute the break even point in units and sales dollars (3 marks) The company has a target net income of RM374,000 What is the required sales in dollars for the company to meet its target (3 marks) 5 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 (3 marks)

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Mortonsen has collected the following information after its first year of sales. Net sales were RM2,000,000 on 100,000 units; selling expenses RM400,000 (30% variable and

Mortonsen has collected the following information after its first year of sales. Net sales were RM2,000,000 on 100,000 units; selling expenses RM400,000 (30% variable and 70% fixed); direct materials RM600,000; direct labor RM340,000; administrative expenses RM500,000 (30% variable and 70% fixed); manufacturing overhead RM480,000 (20% variable and 80% fixed).

The 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 20% next year.

Required

Compute

The contribution margin for the current year and the projected year. (4 marks)

The fixed costs for the current year. (Assume that fixed costs will remain the same in the projected year. (2 marks)

3. Compute the break-even point in units and sales dollars. (3 marks)

The company has a target net income of RM374,000. What is the required sales in dollars for the company to meet its target? (3 marks)

5. 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? (3 marks)