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	$199,100			13
Selling expenses:
	Sales salaries and commissions	41,400			6
	Advertising	14,000
	Travel	3,100
	Miscellaneous selling expense	3,400			5
Administrative expenses:
	Office and officers' salaries	40,400
	Supplies	5,000			2
	Miscellaneous administrative expense	4,640			3
	Total	$311,040			$72

It is expected that 6,480 units will be sold at a price of $180 a unit. Maximum sales within the relevant range are 8,000 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 564a8efbd010f8a_2
Cost of goods sold:
		$fill in the blank 564a8efbd010f8a_4
		fill in the blank 564a8efbd010f8a_6
		fill in the blank 564a8efbd010f8a_8
Total cost of goods sold			fill in the blank 564a8efbd010f8a_9
Gross profit			$fill in the blank 564a8efbd010f8a_10
Expenses:
Selling expenses:
	$fill in the blank 564a8efbd010f8a_12
	fill in the blank 564a8efbd010f8a_14
	fill in the blank 564a8efbd010f8a_16
	fill in the blank 564a8efbd010f8a_18
Total selling expenses		$fill in the blank 564a8efbd010f8a_19
Administrative expenses:
	$fill in the blank 564a8efbd010f8a_21
	fill in the blank 564a8efbd010f8a_23
	fill in the blank 564a8efbd010f8a_25
Total administrative expenses		fill in the blank 564a8efbd010f8a_26
Total expenses			fill in the blank 564a8efbd010f8a_27
Operating income			$fill in the blank 564a8efbd010f8a_28

2. What is the expected contribution margin ratio? Round to the nearest whole percent. fill in the blank 54ca99f65033026_1 %

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

Units	fill in the blank 54ca99f65033026_2 units
Dollars	$fill in the blank 54ca99f65033026_3

4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? $ fill in the blank 54ca99f65033026_4

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

Dollars:	$fill in the blank 54ca99f65033026_5
Percentage: (Round to the nearest whole percent.)	fill in the blank 54ca99f65033026_6	%

6. Determine the operating leverage. Round to one decimal place. fill in the blank 54ca99f65033026_7