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 20Y3 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				$46
	Direct labor				40
	Factory overhead	$200,000			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	132,000
	Supplies	10,000			4
	Miscellaneous administrative expense	13,400			1
Total		$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.

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 2093 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 $46 Direct labor 40 $200,000 20 Factory overhead Selling expenses: Sales salaries and commissions 110,000 8 40,000 Advertising Travel Miscellaneous selling expense 12,000 7,600 1 Administrative expenses: Office and officers' salaries 132,000 10,000 Supplies Miscellaneous administrative expense 13,400 Total $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: Required: 1. Prepare an estimated income statement for 20Y3. Wolsey Industries Inc. Estimated Income Statement For the Year Ended December 31, 2013 Sales Cost of goods sold: Direct materials Direct labor Factory overhead Total cost of goods sold 00 Gross profit Expenses: Selling expenses: Sales salaries and commissions Advertising dil Travel Miscellaneous selling expense Total selling expenses Administrative expenses: Office and officers' salaries Supplies Miscellaneous administrative expense Total administrative expenses Total expenses Operating income Feedback 2. What is the expected contribution margin ratio? % 3. Determine the break-even sales in units and dollars. . Units units Dollars $2,100,000 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