Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating leverage Balmain 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 Estimated Estimated Variable Cost follows: Production costs: Fixed Cost (per unit sold) Direct materials Direct labor Factory overhead $26 17 $453,400 13 Selling expenses: Sales salaries and commissions Advertising 94,200 31,900 Travel 7,100 Miscellaneous selling expense 7,000 Administrative expenses Office and officers salaries Supplies Miscellaneous administrative expense Total 92,100 11.300 10,600 3 $700,480 $72 It is expected that 10,660 units will be sold at a price of $180 a unit. Maximum sales within the relevant range are 13,000 units Required: 1. Prepare an estimated income statement for 2017. Belmain Co. Estimated Income Statement For the Year Ended December 31, 2017 Line Item Description Amount Amount Amount eBook Print Item 1. Prepare an estimated income statement for 2017. Belmain Co. Estimated Income Statement For the Year Ended December 31, 2017 Line Item Description Cost of goods sold: Amount Amount Amount Total cost of goods sold Gross profit Expenses: Selling expenses: Total selling expenses Administrative expenses: Total administrative expenses Total expenses Operating income 2. What is the expected contribution margin ratio? (Round to the nearest whole percent.) Selling expenses: Total selling expenses Administrative expenses: Total administrative expenses Total expenses Operating income 2. What is the expected contribution margin ratio? (Round to the nearest whole percent.) % 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: (Round to the nearest whole percent.) 6. Determine the operating leverage. (Round to one decimal place.) %