Question
Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production
Belmain Co. expects to maintain the same inventories at the end of 20Y7 as at the beginning of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various department heads were asked to submit estimates of the costs for their departments during the year. A summary report of these estimates is as follows:
Estimated Fixed Cost | Estimated Variable Cost (per unit sold) | ||||||
Production costs: | |||||||
Direct materials | $26 | ||||||
Direct labor | 17 | ||||||
Factory overhead | $511,500 | 13 | |||||
Selling expenses: | |||||||
Sales salaries and commissions | 106,300 | 6 | |||||
Advertising | 36,000 | ||||||
Travel | 8,000 | ||||||
Miscellaneous selling expense | 8,800 | 5 | |||||
Administrative expenses: | |||||||
Office and officers' salaries | 103,900 | ||||||
Supplies | 12,800 | 2 | |||||
Miscellaneous administrative expense | 11,900 | 3 | |||||
Total | $799,200 | $72 |
It is expected that 7,400 units will be sold at a price of $288 a unit. Maximum sales within the relevant range are 9,000 units.
Required:
1. Prepare an estimated income statement for 20Y7.
Belmain Co. Estimated Income Statement For the Year Ended December 31, 2017 Cost of goods sold: Total cost of goods sold Gross profit Expenses: Selling expenses: Total selling expenses Administrative expenses: Total administrative expenses Total expenses Operating income 2. What is the expected contribution margin ratio? Round to the nearest whole percent. 3. Determine the break-even sales in units and dollars. Units units Dollars 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? $ 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars: % Percentage: (Round to the nearest whole percent.) 6. Determine the operating leverage. Round to one decimal placeStep by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started