Reference no: EM132507410

Sales                                                 $2,880,000
Cost of goods sold                                1,400,000
Gross profit                                        $1,480,000

Expenses:
Selling expenses                                      $400,000
Administrative expenses                            387,500
Total expenses                                          787,500
Income from operations                              $ 692,500

The division of costs between variable and fixed is as follows:

                                              Variable                        Fixed
Cost of goods sold                         75%                         25%
Selling expenses                             60%                         40%
Administrative expenses                       80%                    20%

• Management is considering a plant expansion program for the following year that will permit an increase of $900,000 in yearly sales. The expansion will increase fixed costs by $212,500 but will not affect the relationship between sales and variable costs.

Instructions

Question 1. Determine the total fixed costs and the total variable costs for the current year.

Question 2. Determine the unit variable cost and  the unit contribution margin for the current year.