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 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				$22
	Direct labor				14
	Factory overhead	$516,100			11
Selling expenses:
	Sales salaries and commissions	107,300			5
	Advertising	36,300
	Travel	8,100
	Miscellaneous selling expense	8,900			4
Administrative expenses:
	Office and officers' salaries	104,800
	Supplies	12,900			2
	Miscellaneous administrative expense	12,000			2
	Total	$806,400			$60

It is expected that 7,680 units will be sold at a price of $240 a unit. Maximum sales within the relevant range are 10,000 units.

Required:

1. Prepare an estimated income statement for 20Y7.

Belmain Co.
Estimated Income Statement
For the Year Ended December 31, 20Y7
			$fill in the blank
Cost of goods sold:
		$fill in the blank
		fill in the blank
		fill in the blank
Cost of goods sold			fill in the blank
Gross profit			fill in the blank
Expenses:
Selling expenses:
	fill in the blank
	fill in the blank
	fill in the blank
	fill in the blank
Total selling expenses		fill in the blank
Administrative expenses:
	fill in the blank
	fill in the blank
	fill in the blank
Total administrative expenses		fill in the blank
Total expenses			fill in the blank
Income from operations			fill in the blank

2. What is the expected contribution margin ratio? Round to the nearest whole percent. fill in the blank 6745aa0b1fadff9_1 %

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

Units	fill in the blank
Dollars	fill in the blank

4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? $ fill in the blank 6745aa0b1fadff9_4

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

Dollars:	fill in the blank
Percentage: (Round to the nearest whole percent.)	fill in the blank	%

6. Determine the operating leverage. Round to one decimal place. fill in the blank