PR 21-6A Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating leverage Blythe Industries Inc. expects to maintain the same inventories at the end of 2012 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 2012. A summary report of these estimates is as follows: Estimated Estimated Variable Cost Fixed Cost h Production costs: (per unit sold) Direct materials $30 Direct labor 20 Factory overhead. $340,000 Selling expenses: Sales salaries and commissions 80,000 Advertising 32,000 Travel 8,000 Miscellaneous selling expense 7,600 Administrative expenses Office and officers' salaries 120,000 Supplies 8,000 Miscellaneous administrative expense 4,400 Total $600,000 $75 5 llu = 2 It is expected that 8,000 units will be sold at a price of $200 a unit. Maximum sales within the relevant range are 9,000 units Instructions 1. Prepare an estimated income atenient for 2012 2. What is the expected contribution lugin ratio 3. Determine the break even sales in units and dollars Construct a cost volume profit chari 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