of safety, and operating leverage Organic Health Care Products Inc. expects to maintain the same inventories at the end of 2018 as at the beginning of the year. The total of all production costs for the year is therefore as sumed 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 20Y8. A summary report of these estimates is as follows: Production costs: Direct materials Direct labor Factory overhead Selling expenses: Advertising Sales salaries and commissions Travel Miscellaneous selling expense Administrative expenses: Estimated Fixed Cost $ 200,000 1,450,000 93,000 340,000 2,000 300,000 10,000 5,000 $2,400,000 Estimated Variable Cost (per unit sold) Instructions 1. Prepare an estimated income statement for 20Y8. 2. What is the expected contribution margin ratio? 3. Determine the break-even sales in units. $ 8.00 3.00 1.50 1.85 Office and officers'salaries Supplies Miscellaneous administrative expense Total It is expected that 400,000 units will be sold at a price of $25 a unit. Maximum sales within the relevant range are 500,000 units. 0.10 0.50 0.05 $15.00 4. Construct a cost-volume-profit chart indicating the break-even sales. 5. What is the expected margin of safety in dollars and as a percentage of sales? 6. Determine the operating leverage.