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				$28
	Direct labor				19
	Factory overhead	$718,800			14
Selling expenses:
	Sales salaries and commissions	149,400			6
	Advertising	50,500
	Travel	11,200
	Miscellaneous selling expense	12,400			6
Administrative expenses:
	Office and officers' salaries	146,000
	Supplies	18,000			2
	Miscellaneous administrative expense	16,900			3
	Total	$1,123,200			$78

It is expected that 8,800 units will be sold at a price of $312 a unit. Maximum sales within the relevant range are 11,000 units.

Required:

1. Prepare an estimated income statement for 20Y7.

Belmain Co.
Estimated Income Statement
For the Year Ended December 31, 20Y7
Sales			$2,745,600
Cost of goods sold:
Direct materials		$246,400
Direct labor		167,200
Factory overhead		123,200
Total cost of goods sold
Gross profit			$
Expenses:
Selling expenses:
Sales salaries and commissions	$896,400
Advertising
Travel
Direct materials
Total selling expenses		$
Administrative expenses:
	$
Total administrative expenses
Total expenses
Income from operations			$

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	units

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 place.