Q.1: Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage Carmen Inc. 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: Production costs Fixed VC per unit Direct materials 20 Direct labor 22 Factory overhead 120,700 15 Expenses Selling expenses Sales salaries and commissions 32,000 5 Advertising 10,000 Travel 2,200 Miscellaneous selling expenses 1,800 Administrative expenses Office and officers' salaries 42,800 Supplies 5,500 2 Miscellaneous. admin expenses 5,000 Total 220,000 72 6 2 Number of units sold 8,000 units Selling price per unit 160 per unit Relevant range of production and sales are 10,000 units Required: A. Prepare an estimated income statement for 2017 using the traditional format of income statement. B. What is the expected contribution margin ratio? C. Determine the break-even sales in units and dollars. D. Construct a cost-volume-profit chart on your own paper. What is the amount of break- even sales? 1 E. What is the expected margin of safety in dollars and as a percentage of sales? If required, round the percent to one decimal place, eg 15.4%. F. Determine the operating leverage. Round your answer to two decimal points