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 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: Production costs: Direct materials Direct labor Factory overhead Estimated Variable Cost Estimated (per Fixed unit Cost sold) $19 13 $597,200 10 Selling expenses: Sales salaries and commissions 124,100 Advertising 42,000 Travel 9,300 Miscellaneous selling expense 10,300 Administrative expenses: Office and officers' salaries Supplies Miscellaneous administrative expense Total 121,300 14,900 2 14,020 2 $933,120 $54 It is expected that 9,360 units will be sold at a price of $216 a unit. Maximum sales within the relevant range are 12,000 units. Required: 1. Prepare an estimated income statement for 2017. Sales Cost of goods sold: Direct materials Direct labor Factory overhead Belmain Co. Estimated Income Statement For the Year Ended December 31, 2017 112,320 X 121,680 2,021,760 Cost of goods sold Gross profit 690,800 924,800 X 1,096,960 X Expenses: Selling expenses: Sales salaries and commissions 161,540 Advertising 42,000 Travel 9,300 Miscellaneous selling expense 47,740 Total selling expenses 260,580 Administrative expenses: Office and officers' salaries 121,300 Supplies 33,620 Miscellaneous administrative expense 32,740 Total administrative expenses 187,660 Total expenses 448,240 Income from operations 648,720 X 2. What is the expected contribution margin ratio? Round to the nearest whole percent. X % 3. Determine the break-even sales in units and dollars. Units X units X units Dollars 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? S x 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars: Percentage: (Round to the nearest whole percent.) 6. Determine the operating leverage. Round to one decimal place. x x X %