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 | $26 | ||||||
Direct labor | 17 | ||||||
Factory overhead | $511,500 | 13 | |||||
Selling expenses: | |||||||
Sales salaries and commissions | 106,300 | 6 | |||||
Advertising | 36,000 | ||||||
Travel | 8,000 | ||||||
Miscellaneous selling expense | 8,800 | 5 | |||||
Administrative expenses: | |||||||
Office and officers' salaries | 103,900 | ||||||
Supplies | 12,800 | 2 | |||||
Miscellaneous administrative expense | 11,900 | 3 | |||||
Total | $799,200 | $72 |
It is expected that 7,400 units will be sold at a price of $288 a unit. Maximum sales within the relevant range are 9,000 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 318b87fdf016fe2_2 | |||
Cost of goods sold: | |||
$fill in the blank 318b87fdf016fe2_4 | |||
fill in the blank 318b87fdf016fe2_6 | |||
fill in the blank 318b87fdf016fe2_8 | |||
Total cost of goods sold | fill in the blank 318b87fdf016fe2_9 | ||
Gross profit | $fill in the blank 318b87fdf016fe2_10 | ||
Expenses: | |||
Selling expenses: | |||
$fill in the blank 318b87fdf016fe2_12 | |||
fill in the blank 318b87fdf016fe2_14 | |||
fill in the blank 318b87fdf016fe2_16 | |||
fill in the blank 318b87fdf016fe2_18 | |||
Total selling expenses | $fill in the blank 318b87fdf016fe2_19 | ||
Administrative expenses: | |||
$fill in the blank 318b87fdf016fe2_21 | |||
fill in the blank 318b87fdf016fe2_23 | |||
fill in the blank 318b87fdf016fe2_25 | |||
Total administrative expenses | fill in the blank 318b87fdf016fe2_26 | ||
Total expenses | fill in the blank 318b87fdf016fe2_27 | ||
Operating income | $fill in the blank 318b87fdf016fe2_28 |
2. What is the expected contribution margin ratio? Round to the nearest whole percent. fill in the blank c9510d092fe9031_1 %
3. Determine the break-even sales in units and dollars.
Units | fill in the blank c9510d092fe9031_2 units |
Dollars | $fill in the blank c9510d092fe9031_3 |
4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? $ fill in the blank c9510d092fe9031_4
5. What is the expected margin of safety in dollars and as a percentage of sales?
Dollars: | $fill in the blank c9510d092fe9031_5 | |
Percentage: (Round to the nearest whole percent.) | fill in the blank c9510d092fe9031_6 | % |
6. Determine the operating leverage. Round to one decimal place. fill in the blank
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