The problem is below, but here’s my question:

Where does direct materials fall under, Variable costs or Fixed Costs? 

Same for direct labor, Variable or fixed? 

I’m trying to find the answer for the contribution margin but I can’t get the right answer because I think I’m placing these two costs in the wrong places. I thought the materials would go under fixed and labor under variable costs but it’s wrong. Could it be that they both go under variable costs? 

Viejol Corporation has collected the following information after its first year of sales. Sales were $2,000,000 on 100,000 units, selling expenses $250,000 (40% variable and 60% fixed), direct materials $500,000, direct labor $581,000, administrative expenses $272,000 (20% variable and 80% fixed), and manufacturing overhead $378,000 (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.

“””Here is my Problem it comes from the Income Tax Fundamentals Book 2010 by Whittenburg & Altus-Buller;Noah and Joan Arc’s Tax ReturnNoah and Joan Arc live with their family at 4342 Josie Jo, Santee, CA 92071. Noah’s Social Security number is 434-11-3311; Joan’s is 456-87-5432. Both are in their 30’s and enjoy good health and eyesight. Noah owns and operates a pet store and Joan is a firefighter for the city.1. The Arcs have two children, a son named Billie Bob (Social Security number 598-01-2345), who is 7 years old, and a daughter Mary Sue (Social Security number 554-33-2411), who is 4 years old. The Arcs paid $2,800 to the Roundup Day Care Center to take care of Mary Sue while they worked. Because Joan is a firefighter, she was home in the afternoon to care for Billie Bob after school.2. For the current year, Joan’s W-2 from the city fire department showed the following:Wages-$27,000, Federal income tax withheld-$5,050, State income tax withheld-$1,200, and FICA tax withheld-$2,066Noah made estimated federal income tax payments of $12,000 and estimated state income tax payments of $1,000 during the current year.3. Noah’s pet store is located at 18542 Mission Road, Santee, CA 92071. The name of the store is “The Arc,” and its taypayer ID is 95-9876556. The beginning and ending inventories are both $10,000. The revenue and expenses for the year are as follows:Sales Revenue-$144,000Expenses:Cost of Sales $62,000; Insurance $750; Accounting fees $1,800; Wages $25,000; Payroll taxes $2,250; Utilities $2,700; Rental expense $7,200; Total expense equaled $101,700 and the net income was $43,200.4. Noah and Joan paid the following amounts during the year (all by check):Political contributions-$250; Church donations (for which a written acknowledgment was received)-$2,300; Real estate taxes on their home-$1,200; Mortgage interest for purchase of home-$12,000; Tax return preparation fees-$350; Credit card interest-$220; Automobile insurance premiums-$600; Uniforms for Joan-$125.5. Noah likes to invest in the stock market. During the year he sold the following securities, none of which were qualified small business companies: Stock name-Blue Co. Date acquired 02/11/03 Date sold 08/15/09 Sales Price $4,500 Cost basis $2,300; Yellow Co. Date acquired 01/31/09 Date Sold 06/05/09 Sales Price $6,000 Cost basis $5,000; Red Co. Date acquired 10/02/04 Date sold 10/07/09 Sales price $12,000 Cost basis $1,600. The expenses of the sale are included in the cost basis. Noah has a long-term capital loss carry over from last year of $2,300.6. During the year, Noah and Joan received the following qualifying dividends:Exxon-$320; Coca-Cola-$268; and Texas Utilities-$220. All stocks, bonds, and savings accounts were purchased or established with community property.7. Noah and Joan own rental property located at 6431 Gary Ct., San Diego, CA 92115. The revenue and expenses for the year are as follows:Rent Income-$14,000; Insurance-$550; Interest Expense-$7,000; Property taxes-$1,000; Miscellaneous expenses-$600; Depreciation (The house was acquired in 1990)-$3,000Required: Although Noah and Joan do not believe their tax return will be unduly complicated, they do realize their limitations and come to you for assistance. You are to prepare their federal income tax return in good form, signing the return as the preparer. Do not complete a California state income tax return. Assume any other information (addresses, etc.) that you may need. The following forms and schedules are required:Form 1040; Schedule A; Schedule B; Schedule C; Schedule D; Schedule E; Schedule M; Schedule SE; and Form 2441.If desired, additional forms may be obtained from the IRS Web site at http:// ” ”