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:

Required:

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1. Prepare an estimated income statement for 20Y7.

Estimated Fixed Cost Estimated Variable Cost (per unit sold) $28 19 $377,400 14 6 Production costs: Direct materials Direct labor Factory overhead Selling expenses: Sales salaries and commissions Advertising Travel Miscellaneous selling expense Administrative expenses: Office and officers' salaries Supplies Miscellaneous administrative expense 78,400 26,500 5,900 6,500 6 76,700 9,400 N 8,880 3 Total $589,680 $78 It is expected that 11,760 units will be sold at a price of $156 a unit. Maximum sales within the relevant range are 15,000 units. 2. What is the expected contribution margin ratio? Round to the nearest whole percent. 50 % 3. Determine the break-even sales in units and dollars. Units 7,560 units Dollars 1,179,36 units 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? 7,560 x $ 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars: 655,200 36 % Percentage: (Round to the nearest whole percent.) 6. Determine the operating leverage. Round to one decimal place. 2.8 Belmain Co. Estimated Income Statement For the Year Ended December 31, 2017 1,834,560 Sales Cost of goods sold: Direct materials Direct labor Factory overhead 329,280 223,440 542,040 1,094,760 739,800 Total cost of goods sold Gross profit Expenses: Selling expenses: Sales salaries and commissions Advertising 148,960 26,500 Travel 5,900 Miscellaneous selling expense 77,060 258,420 Total selling expenses Administrative expenses: Office and officers' salaries Supplies 76,700 32,920 Expenses: Selling expenses: Sales salaries and commissions Advertising Travel 148,960 26,500 5,900 Miscellaneous selling expense 77,060 258,420 Total selling expenses Administrative expenses: Office and officers' salaries Supplies 76,700 32,920 Miscellaneous administrative expense 44,160 Total administrative expenses 153,780 Total expenses 412,200 Income from operations 327,600