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	$514,300			11
Selling expenses:
	Sales salaries and commissions	106,900			5
	Advertising	36,200
	Travel	8,000
	Miscellaneous selling expense	8,800			4
Administrative expenses:
	Office and officers' salaries	104,500
	Supplies	12,900			2
	Miscellaneous administrative expense	12,000			2
	Total	$803,600			$60

It is expected that 9,840 units will be sold at a price of $200 a unit. Maximum sales within the relevant range are 12,000 units.

Required:

Question Content Area

1. Prepare an estimated income statement for 20Y7.

			$- Select -
Cost of goods sold:

		$- Select -

		- Select -

		- Select -
Cost of goods sold			fill in the blank a91c260b6037f8a_9
Gross profit			$fill in the blank a91c260b6037f8a_10
Expenses:
Selling expenses:

	$- Select -

	- Select -

	- Select -

	- Select -
Total selling expenses		$fill in the blank a91c260b6037f8a_19
Administrative expenses:

	$- Select -

	- Select -

	- Select -
Total administrative expenses		fill in the blank a91c260b6037f8a_26
Total expenses			fill in the blank a91c260b6037f8a_27
Income from operations			$fill in the blank a91c260b6037f8a_28

Question Content Area

2. What is the expected contribution margin ratio? Round to the nearest whole percent. fill in the blank bc9de7ff2fd804d_1 %

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

Units	fill in the blank bc9de7ff2fd804d_2 units
Dollars	fill in the blank bc9de7ff2fd804d_3 units

4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? $ fill in the blank bc9de7ff2fd804d_4

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

Dollars:	$fill in the blank bc9de7ff2fd804d_5
Percentage: (Round to the nearest whole percent.)	fill in the blank bc9de7ff2fd804d_6	%

6. Determine the operating leverage. Round to one decimal place. fill in the blank bc9de7ff2fd804d_7

3 more Check My Work uses remaining.