Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating leverage EXCEL TEMPLATE Obj. 2 - Compute the contribution margin, the contribution margin ratio, and the unit contribution margin., 3 - Determine the break-even point and sales necessary to achieve a target profit., 4 - Using a cost-volume-profit chart and a profit-volume chart, determine the break-even point and sales necessary to achieve a target profit., 5 - Compute the break-even point for a company selling more than one product, the operating leverage, and the margin of safety.Belmain Co. expects to maintain the same inventories at the end of 2017 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 Cos (per unit sold) Production costs: Direct materials.. Direct labor.... $50.00 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. 1. Belmain Co. Estimated Income Statement For the Year Ended December 31, 2017 $ 2,880,000 Sales Cost of goods sold: Direct materials Direct labor Factory overhead Cost of goods sold Gross profit Expenses: Selling expenses Sales salaries and commissions Advertising Travel 116,000 4,000 2. Miscellaneous selling expense Total selling expenses Administrative expenses: Office and officers' salaries Supplies Miscellaneous administrative expense Total administrative expenses Total expenses Income from operations $ 325,000 Contribution margin ratio: Sales Variable costs Contribution margin Sales Contribution margin ratio Units x Unit Variable Cost Break-even sales: Fixed costs Sale Price Unit Variable Cost Unit contribution margin Break-even sales (units) Sale price Break-even sales (dollars) 4. For each unit level of sales, enter the total sales dollars and total costs. The chart at right will be plotted as you enter the amounts. After all points are plotted, grab and move the labels provided at the left to identify each area. Units Sales $ Costs $ 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Operating Loss Area Break-Even Point Operating Profit Area Cost-Volume-Profit Chart $1 $1 $1 $1 $0 $0 $- 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Units Sales and Costs -Sales $ -Costs $ 5. Margin of safety: 6. Sale Price x Units Expected sales Break-even point Margin of safety (in dollars) Expected sales Margin of safety (as a percentage of sales) Operating leverage: Contribution margin Income from operations Operating leverage Unit CM $ x Units