Bemain Co. expects to maintain the same inventories at the end of 2017 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 Estimated Variable Cost Fixed Cost (per unit sold) Production costs: Direct materials $24 Direct labor 16 Factory overhead $250,900 12 Selling expenses Sales salaries and commissions 52,100 Advertising 17.000 Travel 3,000 Miscellaneous sing expense 300 Administrative expenses Office and officers are 57.000 Supe 6,300 Mellaneous administrative pente 5,040 YO 3302.040 1. Prepare an estimated income statement for 2017. Belmain Co. Estimated Income Statement For the Year Ended December 31, 2017 Sales Cost of goods sold: Direct materials Direct labor Factory overhead Cost of goods sold Gross profit Expenses: Selling expenses: Sales salaries and commissions Cost of goods manufactured Travel Miscellaneous selling expense Total selling expenses Administrative expenses: office and officers salaries Supplies Miscellaneous administrative expense 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: 96 Percentage: (Round to the nearest whole percent.) 6. Determine the operating leverage. Round to one decimal place. 12 Contribution Margin, Break-Even Sales, Cost-Volume-Profit chart, Margin of safety, and Operating Leverage Belmain Co. expects to maintain the same inventories at the end of 207 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 costi for their departments during the year. A summary report of these estimates is as follows: Estimated Estimated Variable Cost Fixed Cost (per unit sold) Production costs: Direct materials $24 Direct labor 16 Factory overhead $250,900 Selling expenses Sales salaries and commissions 52,100 Advertising 17,600 Travel Miscellaneous selling expense 4,300 Administrative expenses Office and officers salaries 51,000 Supplies 6.300 3 Miscellaneous administrative expense 5,940 5392.040 Total 5 3,900 2 566 It is expected that 9,240 units will be sold at a price of $132 a unit. Maximum sales within the relevant range are 12,000 units. Required: Belmain Co. Estimated Income Statement For the Year Ended December 31, 2017 Sales Cost of goods sold: Direct materials Direct labor Factory overhead Cost of goods sold 00 Gross profit Expenses: Selling expenses: Sales salaries and commissions cost of goods manufactured Travel Miscellaneous selling expense D 11 Total selling expenses Administrative expenses: Office and officers salaries Supplies Miscellaneous administrative expense Total administrative expenses Total expenses 00 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
