PR 21-6B Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating leverage Obj. 2 - Compute the contribution margin, the contribution margin ratio, and the unit contribution margin., 3 - Determine the break-even point and sales e.com/staticb/ui/evo/index.html?elSBN 9781337272261&id=181267467&nbld=509172&snapshotld=509172&dockAppUid=101& Print Preview necessary to achieve a target profit., 4 - Using a cost-volume-profit chart and a profit-volume chart, determine the break-even point and sales necessary to achieve a target profit., 5 - Compute the break-even point for a company selling more than one product, the operating leverage, and the margin of safety. Excel Belmain Co. expects to maintain the same inventories at the end of 2017 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: 5/7 Estimated Fixed Cost Estimated Variable Cos (per unit sold) Production costs: Direct materials. $50.00 Direct labor..... 30.00 Factory overhead. $ 350,000 6.00 Selling expenses: Sales salaries and commissions... 340,000 4.00 Advertising..... 116,000 Travel.... 4,000 Miscellaneous selling expense 2,300 1.00 Administrative expenses: Office and officers' salaries.. 325,000 Supplies........ 6,000 Miscellaneous administrative expense 8,700 Total.... $1,152,000 $96.00 4.00 1.00 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. 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? e.com/staticb/ui/evo/index.html?elSBN 9781337272261&id=181267467&nbld=509172&snapshotld=509172&dockAppUid=101& Print Preview 6. Determine the operating leverage. 6/7