Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage Wolsey Industries Inc. expects to maintain the same inventories at the end of 2013 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 Estimated Variable Cost Fixed Cost (per unit sold) Production costs: Direct materials Direct labor Factory overhead $46 40 $200,000 4 20 Selling expenses: Sales salaries and commissions 110,000 8 Advertising 40,000 Travel 12,000 Miscellaneous selling expense 7,600 1 Administrative expenses: Office and officers' salaries Supplies Miscellaneous administrative expense Total 132,000 10,000 4 13,400 1 $525,000 $120 It is expected that 21,875 units will be sold at a price of $160 a unit. Maximum sales within the relevant range are 27,000 units. Required: 1. Prepare an estimated income statement for 2013. Sales Cost of goods sold: Direct materials Direct labor Factory overhead Total cost of goods sold Gross profit Expenses: Selling expenses: Wolsey Industries Inc. Estimated Income Statement For the Year Ended December 31, 20Y3 Sales salaries and commissions Advertising Travel Miscellaneous selling expense Total selling expenses Administrative expenses: 0000 LT 000 00 00 10000 Cost of goods sold: Direct materials Direct labor Factory overhead Total cost of goods sold Gross profit Expenses: Selling expenses: Sales salaries and commissions Advertising Travel Miscellaneous selling expense Total selling expenses Administrative expenses: Office and officers' salaries Supplies Miscellaneous administrative expense Total administrative expenses Total expenses Operating income 2. What is the expected contribution margin ratio? % 3. Determine the break-even sales in units and dollars, Units units Dollars 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars Percentage (If required, round the percent to one decimal place, e.g. 15.4%.) 6. Determine the operating leverage. If required, round your answer to one decimal place, e.g. 15.4. %