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				$30
	Direct labor				20
	Factory overhead	$150,500			15
Selling expenses:
	Sales salaries and commissions	31,300			7
	Advertising	10,600
	Travel	2,400
	Miscellaneous selling expense	2,600			6
Administrative expenses:
	Office and officers' salaries	30,600
	Supplies	3,800			3
	Miscellaneous administrative expense	3,400			3
	Total	$235,200			$84

It is expected that 6,300 units will be sold at a price of $168 a unit. Maximum sales within the relevant range are 8,000 units.

Required:

1. Prepare an estimated income statement for 20Y7.

2. What is the expected contribution margin ratio? Round to the nearest whole percent.

3. Determine the break-even sales in units and 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?

6. Determine the operating leverage. Round to one decimal place.