Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage Soldner Health Care Products Inc. expects to maintain the same inventories at the end of 2014 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 2014. A summary report of these estimates is as follows: Estimated Fixed Cost Estimated Variable Cost (per unit sold) Production costs: Direct materials $30 Direct labor 20 Factory overhead $629,000 15 Selling expenses: Sales salaries and commissions 130,700 7 Advertising 44,200 Travel 9,800 Miscellaneous selling expense 10,800 6 Administrative expenses: Office and officers' salaries 127,800 Supplies 15,700 3 Miscellaneous administrative expense 14,800 3 Total $982,800 $84 It is expected that 11,700 units will be sold at a price of $210 a unit. Maximum sales within the relevant range are 15,000 units. Required:

Hide Hint(s) 1. Prepare an estimated income statement for 2014.

Soldner Health Care Products Inc. Estimated Income Statement For the Year Ended December 31, 2014 $ Cost of goods sold: $ Cost of goods sold Gross profit $ Expenses: Selling expenses: $ Total selling expenses $ Administrative expenses: $ Total administrative expenses Total expenses Income from operations $

2. What is the expected contribution margin ratio? Round to the nearest whole percent. % 3. Determine the break-even sales in units. units 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.

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