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Compute the break-even point in units

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Question - Williams Walk in Wardrobes Corporation has collected the following information after its first year of sales.

Sales were $1,660,000 on 100,000 units;

Selling expenses $220,000 (45% variable, 55% fixed);

Direct materials $510,000; direct labour $290,000;

Administrative expenses $260,000 (25% variable, 75% fixed);

Manufacturing overhead $355,000 (70% variable, 30% fixed).

The owner Mr. William Gup has asked you to do a CVP analysis so that it can make plans for the coming year. William has projected that unit sales will increase by 10% next year.

Required -

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. Briefly comment on this result.

Reference no: EM131676839

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