Question
Question Content Area Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage Belmain Co. expects to maintain the same inventories at the
Question Content Area
Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage
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 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 Fixed Cost | Estimated Variable Cost (per unit sold) | ||||||
Production costs: | |||||||
Direct materials | $26 | ||||||
Direct labor | 17 | ||||||
Factory overhead | $398,100 | 13 | |||||
Selling expenses: | |||||||
Sales salaries and commissions | 82,700 | 6 | |||||
Advertising | 28,000 | ||||||
Travel | 6,200 | ||||||
Miscellaneous selling expense | 6,800 | 5 | |||||
Administrative expenses: | |||||||
Office and officers' salaries | 80,900 | ||||||
Supplies | 10,000 | 2 | |||||
Miscellaneous administrative expense | 9,380 | 3 | |||||
Total | $622,080 | $72 |
It is expected that 5,760 units will be sold at a price of $360 a unit. Maximum sales within the relevant range are 7,000 units.
Required:
Question Content Area
1. Prepare an estimated income statement for 20Y7.
Direct materialsIncome from operationsMiscellaneous administrative expenseSales salaries and commissionsSalesSales | $Sales | ||
Cost of goods sold: | |||
Direct materialsIncome from operationsSalesSuppliesTravelDirect materials | $Direct materials | ||
AdvertisingDirect laborIncome from operationsLoss from operationsOffice and officers' salariesDirect labor | Direct labor | ||
Factory overheadMiscellaneous administrative expenseSalesSuppliesTravelFactory overhead | Factory overhead | ||
Cost of goods sold | fill in the blank f911cb0b1ffe036_9 | ||
Gross profit | $fill in the blank f911cb0b1ffe036_10 | ||
Expenses: | |||
Selling expenses: | |||
Factory overheadIncome from operationsMiscellaneous administrative expenseSales salaries and commissionsSalesSales salaries and commissions | $Sales salaries and commissions | ||
AdvertisingCost of goods manufacturedDirect materialsOffice and officers' salariesSalesAdvertising | Advertising | ||
Direct laborFactory overheadSalesSuppliesTravelTravel | Travel | ||
Direct materialsMiscellaneous administrative expenseMiscellaneous selling expenseSalesSuppliesMiscellaneous selling expense | Miscellaneous selling expense | ||
Total selling expenses | $fill in the blank f911cb0b1ffe036_19 | ||
Administrative expenses: | |||
AdvertisingDirect laborOffice and officers' salariesSales salaries and commissionsTravelOffice and officers' salaries | $Office and officers' salaries | ||
Direct materialsFactory overheadSalesSuppliesTravelSupplies | Supplies | ||
Direct materialsMiscellaneous administrative expenseMiscellaneous selling expenseSales salaries and commissionsSalesMiscellaneous administrative expense | Miscellaneous administrative expense | ||
Total administrative expenses | fill in the blank f911cb0b1ffe036_26 | ||
Total expenses | fill in the blank f911cb0b1ffe036_27 | ||
Income from operations | $fill in the blank f911cb0b1ffe036_28 |
Question Content Area
2. What is the expected contribution margin ratio? Round to the nearest whole percent. fill in the blank 2c47d8fcf01b00b_1 %
3. Determine the break-even sales in units and dollars.
Units | fill in the blank 2c47d8fcf01b00b_2 units |
Dollars | fill in the blank 2c47d8fcf01b00b_3 units |
4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? $ fill in the blank 2c47d8fcf01b00b_4
5. What is the expected margin of safety in dollars and as a percentage of sales?
Dollars: | $fill in the blank 2c47d8fcf01b00b_5 | |
Percentage: (Round to the nearest whole percent.) | fill in the blank 2c47d8fcf01b00b_6 | % |
6. Determine the operating leverage. Round to one decimal place. fill in the blank 2c47d8fcf01b00b_7
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