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 $20$Y$7$ 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 $$24$

Direct labor $16$

Factory overhead $$486,60012$

Selling expenses:

Sales salaries and commissions $101,1005$

Advertising $34,200$

Travel $7,600$

Miscellaneous selling expense $8,4004$

Administrative expenses:

Office and officers' salaries $98,800$

Supplies $12,2002$

Miscellaneous administrative expense $11,4203$

Total $$760,320$ $$66$

It is expected that $7,040$ units will be sold at a price of $$264$ a unit. Maximum sales within the relevant range are $9,000$ units.

Required:

Question Content Area

$1.$ Prepare an estimated income statement for $20$Y$7.$

Belmain Co$.$

Estimated Income Statement

For the Year Ended December $31,20$Y$7$

$$-$ Select $-$

Cost of goods sold:

$$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

Cost of goods sold fill in the blank $65$b$981$f$69$fd$905$f$\_9$

Gross profit $fill in the blank $65$b$981$f$69$fd$905$f$\_10$

Expenses:

Selling expenses:

$$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

Total selling expenses $fill in the blank $65$b$981$f$69$fd$905$f$\_19$

Administrative expenses:

$$-$ Select $-$

$-$ Select $-$

$-$ Select $-$

Total administrative expenses fill in the blank $65$b$981$f$69$fd$905$f$\_26$

Total expenses fill in the blank $65$b$981$f$69$fd$905$f$\_27$

Income from operations $fill in the blank $65$b$981$f$69$fd$905$f$\_28$

Question Content Area

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

fill in the blank e$0$a$51$f$07$d$07402$a$\_1$

$\%$

$3.$ Determine the break$-$even sales in units and dollars.

Units fill in the blank e$0$a$51$f$07$d$07402$a$\_2$

units

Dollars fill in the blank e$0$a$51$f$07$d$07402$a$\_3$

units

$4.$ Construct a cost$-$volume$-$profit chart on your own paper. What is the break$-$even sales?

$ fill in the blank e$0$a$51$f$07$d$07402$a$\_4$

$5.$ What is the expected margin of safety in dollars and as a percentage of sales?

Dollars: $fill in the blank e$0$a$51$f$07$d$07402$a$\_5$

Percentage: $($Round to the nearest whole percent.$)$ fill in the blank e$0$a$51$f$07$d$07402$a$\_6$

$\%$

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

fill in the blank e$0$a$51$f$07$d$07402$a$\_7$