PR 19-6B Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating leverage Obj. 2, 3, 4, 5 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 EXCEL TEMPLATE 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 Variable Cost+ (per unit sold) Estimated Fixed Cost Production costs Direct materials $50.00 Direct labor.... Factory overhead Selling expenses: 30.00 $ 350,000 6.00 Sales salaries and commissions.. Advertising Travel 340,000 4.00 116,000 4,000 Miscellaneous selling expense 1.00 2,300 Administrative expenses: Office and officers' salaries 325,000 Supplies Miscellaneous administrative expense . 6,000 4.00 8,700 $1,152,000 1.00 $96.00 Total It is expected that 12,000 units will be sold at a price of $240 a unit. Maximum sales within the relevant range are 18,000 units. Instructions 1. Prepare an estimated income statement for 20Y7. 2. What is the expected contribution margin ratio? 3. Determine the break-even sales in units and dollars. Answer 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? (Round to one decimal place.) 6. Determine the operating leverage. IM M Fuge LayOut FOrmulas Bata Review View A A Conditional Formatting Paste Av b Format as Table De 6.4 Cell Styles For C2 A B C D G H J K M N aUcu 4 5 Seore: % 6 7 Kay Code 8 Instructions 9 Answes are entered in tn cells with gray backgrounds 10 Cells with non-gray backgrounds are protected and cannot be edited 11 An asterisk ) will appear to the right of an incomect entry 12 Key oode here 13 14 1. Belmain Co. 15 16 Estimated Income Statement For the Year Ended December 31, 20Y7 17 18 Sales 19 Cost of goods sold Direct materials 20 21 Direct labor Factory overhead Cost of goods sold 22 23 24 Gross proft 25 Expenses: Seling expenses Sales salares and commissions 26 27 Advertising Travel Mscelaneous seling expense 28 29 30 Total selling expenses 31 Administrative expenses Office and officens salaries 32 33 Supples Mscelaneous administrative expense 34 35 Total administrative expenes 36 Total expenses Income from operations 37 36 39 40 41 Pr. 19(5)-6B M tlil Conditional Formatting Paste BIU AU Format as Table v $ % 9 Cell Styles C2 Fe A C D F G H 24 Gross profit Expenses: Selling expenses K L M N 25 26 27 Sales salaries and commissions Advertising Torel Miselaneous seling expense 28 29 30 31 Total selling expenses 32 Administrative expenses 33 34 Office and officers salares Supplies 35 Miscelaneous administrative expense 36 Total administrative expenses 37 Total expenses 38 Income from operations 39 40 41 2. 42 Contribution margin atio: 43 Sales 44 Units Unit Variabie Cost 45 Vanable costs 46 Contribution margin 47 Sales 48 Contribution margin ratio 49 50 51 3. Break-even sales Foxed costs 52 53 Unit Variabe Cost Sale Price 54 Unit contribution margin Broak-even sales (unts) Sale pnce Break-even sales (dolan) 55 56 57 58 59 anter theam de 60 Enr eseh nit level nfeslnsanter the tnalsales.dnllars.and.tntal.cossThe chart.st.einht wilthe nlntad. Pr. 19(5)-6B teSave oFF WRD FinMan 14e_PR 19(5)-68 Home Insert Draw Page Layout Formulas Data Review View X AA Conditional Formatting Insert Paste BIU A Format as Table Delete Cell Styles Format C2 A C F G Hi K L N 95 96 97 98 99 100 P Margin of safety Sale Price Units Expected sales Break-evepgoint Margin of slfety (in dollans) Expected sales Margin of safety (as a percentage of sales) 101 102 103 104 105 106 6 107 108 109 Openating leverage: Unit CM Uhite Cantrbution margin Income from operstions Operating leverage 110 111 112 113 114 115 116 117 118 119 120 121 122 123 124 125 126 127 128 120 130 131 132 133 134 135 Pr. 1965)-68