Question
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
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 $50.00 Direct labor 30.00 Factory overhead $350,000 6.00 Selling expenses: Sales salaries and commissions 340,000 4.00 Advertising 116,000 Travel 4,000 Miscellaneous selling expense 2,300 1.00 Administrative expenses: Office and officers' salaries 325,000 Supplies 6,000 4.00 Miscellaneous administrative expense 8,700 1.00 Total $1,152,000 $96.00 It is expected that 12,000 units will be sold at a price of $240 a unit. Maximum sales within the relevant range are 18,000 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 c17248fa9fca043_2 Cost of goods sold: $fill in the blank c17248fa9fca043_4 fill in the blank c17248fa9fca043_6 fill in the blank c17248fa9fca043_8 Total cost of goods sold fill in the blank c17248fa9fca043_9 Gross profit $fill in the blank c17248fa9fca043_10 Expenses: Selling expenses: $fill in the blank c17248fa9fca043_12 fill in the blank c17248fa9fca043_14 fill in the blank c17248fa9fca043_16 fill in the blank c17248fa9fca043_18 Total selling expenses $fill in the blank c17248fa9fca043_19 Administrative expenses: $fill in the blank c17248fa9fca043_21 fill in the blank c17248fa9fca043_23 fill in the blank c17248fa9fca043_25 Total administrative expenses fill in the blank c17248fa9fca043_26 Total expenses fill in the blank c17248fa9fca043_27 Income from operations $fill in the blank c17248fa9fca043_28 2. What is the expected contribution margin ratio? fill in the blank 8b96da045077f86_1 % 3. Determine the break-even sales in units and dollars. Units fill in the blank 8b96da045077f86_2 units Dollars 4. Construct a cost-volume-profit chart on your own paper. What are break-even sales? 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars $fill in the blank 8b96da045077f86_5 Percentage (If required, round the percent to one decimal place, e.g. 15.4%.) fill in the blank 8b96da045077f86_6 % 6. Determine the operating leverage. fill in the blank 8b96da045077f86_7
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