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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 20Y7

  1. 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 20Y7 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 $22
    Direct labor 14
    Factory overhead $516,100 11
    Selling expenses:
    Sales salaries and commissions 107,300 5
    Advertising 36,300
    Travel 8,100
    Miscellaneous selling expense 8,900 4
    Administrative expenses:
    Office and officers' salaries 104,800
    Supplies 12,900 2
    Miscellaneous administrative expense 12,000 2
    Total $806,400 $60

    It is expected that 7,680 units will be sold at a price of $240 a unit. Maximum sales within the relevant range are 10,000 units.

    Required:

    1. Prepare an estimated income statement for 20Y7.

    Belmain Co.
    Estimated Income Statement
    For the Year Ended December 31, 20Y7
    $fill in the blank
    Cost of goods sold:
    $fill in the blank
    fill in the blank
    fill in the blank
    Cost of goods sold fill in the blank
    Gross profit fill in the blank
    Expenses:
    Selling expenses:
    fill in the blank
    fill in the blank
    fill in the blank
    fill in the blank
    Total selling expenses fill in the blank
    Administrative expenses:
    fill in the blank
    fill in the blank
    fill in the blank
    Total administrative expenses fill in the blank
    Total expenses fill in the blank
    Income from operations fill in the blank

    2. What is the expected contribution margin ratio? Round to the nearest whole percent. fill in the blank 6745aa0b1fadff9_1 %

    3. Determine the break-even sales in units and dollars.

    Units fill in the blank
    Dollars fill in the blank

    4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? $ fill in the blank 6745aa0b1fadff9_4

    5. What is the expected margin of safety in dollars and as a percentage of sales?

    Dollars: fill in the blank
    Percentage: (Round to the nearest whole percent.) fill in the blank %

    6. Determine the operating leverage. Round to one decimal place. fill in the blank

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