Wolsey Industries Inc. Estimated Income Statement 1. For the Year Ended December 31, 20Y3 Sales #REF! Cost of goods sold: #REF! #REF! Direct materials Direct labor Factory overhead #REF! #REF! #REF! Cost of goods sold Gross profit Expenses: Selling expenses Sales salaries and commissions #REF! Advertising #REF! Travel #REF! Miscellaneous selling expense #REF! Total selling expenses #REF! Administrative expenses: Office and officers' salaries #REF! Supplies #REF! Miscellaneous administrative expense #REF! Total administrative expenses #REF! Total expenses #REF! Income from operations #REF! 2. Contribution margin ratio: Sales #REF! Units * Unit Variable Cost #REF! #REF! #REF! #REF! Variable costs Contribution margin Sales Contribution margin ratio #REF! 3. Break-even sales: #REFI Fixed costs - Unit Variable Cost #REFI Sale Price #REFI #REFI #REFI #REFI Unit contribution margin Break-even sales (units) Sale price Break-even sales (dollars) 4. For each unit level of sales, enter the total sales dollars and total costs. The chart at right will be plotted as you enter the amounts. After all points are plotted, grab and move the labels provided at the left to identify each area. Units Sales $ Costs $ 3,000 ### Cost-Volume-Profit Chart 6,000 9,000 $2 12,000 **** 15,000 18,000 ### *** 21,000 **** ### 24,000 *** 27,000 **** Sales $ -Costs $ Operating Loss Area Break-Even Point Operating Profit Area Untitled Untitled Untitled Untitled Untitled Untitled Untitled Untitled Untitled Untitled 1 2 3 4 6 Units 7 9 10 Sales and Costs 5. Margin of safety: Sale Price Units Expected sales #REF! #REF! Break-even point #REF! #REF! #REF! #REF! Margin of safety (in dollars) Expected sales Margin of safety (as a percentage of sales) #REF! 6. Operating leverage: Unit CM $ Units Contribution margin #REF! #REF! ***** Income from operations #REF! Operating leverage #REF! Chapter 19 Cost-Volume-Prott Analysis PR 19-6A Contribution margin, break-even sales, cost-volume-profit chart, Obj. 2, 3, 4, 5 margin of safety, and operating leverage Wolsey Industries Inc. expects to maintain the same inventories at the end of 20Y3 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: V2. 25% EXCH TEMPLATE Estimated Fixed Cost Estimated Variable Cost (per unit sold) Production costs: Direct materials. $ 46 Direct labor 40 Factory overhead. Selling expenses: $200,000 20 Sales salaries and commissions.. 110,000 8. Advertising. 40,000 12,000 7,600 Travel.. Miscellaneous selling expense Administrative expenses: 132,000 10,000 Office and officers' salaries... Supplies.. Miscellaneous administrative expense.. 13,400 1. Total.. $525,000 $120 It is expected that 21,875 units will be sold at a price of $160 a unit. Maximum sales within the relevant range are 27,000 units. Instructions 1. Prepare an estimated income statement for 20Y3. 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? 6. Determine the operating leverage.