Question
Wolsey Industries Inc. expects to maintain the same inventories at the end of 2016 as at the beginning of the year. The total of all
Wolsey Industries Inc. expects to maintain the same inventories at the end of 2016 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:
Question not attempted.
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| Estimated Fixed Cost | Estimated Variable Cost (per unit sold) |
2 | Production costs: |
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3 | Direct materials | $46.00 | |
4 | Direct labor | 40.00 | |
5 | Factory overhead | $200,000.00 | 20.00 |
6 | Selling expenses: |
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7 | Sales salaries and commissions | 110,000.00 | 8.00 |
8 | Advertising | 40,000.00 | |
9 | Travel | 12,000.00 | |
10 | Miscellaneous selling expense | 7,600.00 | 1.00 |
11 | Administrative expenses: |
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12 | Office and officers salaries | 132,000.00 | |
13 | Supplies | 10,000.00 | 4.00 |
14 | Miscellaneous administrative expense | 13,400.00 | 1.00 |
15 | Total | $525,000.00 | $120.00 |
It is expected that 21,875 units will be sold at a price of $160 a unit. Maximum sales within the relevant range
The range of activity over which changes in cost are of interest to management.
are 27,000 units.
Required: | |
A. | Prepare an estimated income statement for 2016. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. |
B. | What is the expected contribution margin ratio The percentage of each sales dollar that is available to cover the fixed costs and provide an operating income. ? |
C. | Determine the break-even sales in units and dollars. |
D. | Construct a cost-volume-profit chart on your own paper. What is the break-even sales? |
E. | What is the expected margin of safety in dollars and as a percentage of sales? |
F. | Determine the operating leverage. Round to one decimal place. |
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Labels and Amount Descriptions
Labels In CengageNOW, a Label is a text entry that does not have an amount associated with it. and Amount DescriptionsIn CengageNOW, an Amount Description is a text entry other than an Account that has an amount associated with it. | |
Advertising | |
Contribution margin | |
Cost of goods sold | |
Direct labor | |
Direct materials | |
Expenses | |
Factory overhead | |
Gross profit | |
Income from operations | |
Manufacturing margin | |
Miscellaneous administrative expense | |
Miscellaneous selling expense | |
Office and officers salaries | |
Sales | |
Sales salaries and commissions | |
Supplies | |
Total administrative expenses | |
Total expenses | |
Total selling expenses | |
Travel | |
Variable cost of goods sold |
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Income Statement
A. Prepare an estimated income statement for 2016. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries.
Question not attempted.
Wolsey Industries Inc. |
Estimated Income Statement |
For the Year Ended December 31, 2016 |
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Solution
Wolsey Industries Inc. |
Estimated Income Statement |
For the Year Ended December 31, 2016 |
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Points:
Feedback
Check My Work
Explanation
none
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Additional Questions
B. What is the expected contribution margin ratio
The percentage of each sales dollar that is available to cover the fixed costs and provide an operating income.
?
Points:
Feedback
Check My Work
Explanation
C. Determine the break-even sales in units and dollars.
Units | units |
Dollars | selector 1 $2,100,000 $3,000,000 $1,200,000 $1,400,000 |
Points:
Feedback
Check My Work
Explanation
D. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?
selector 1
$1,200,000
$3,000,000
$1,400,000
$2,100,000
Points:
Feedback
Check My Work
none
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Final Questions
E. What is the expected margin of safety in dollars and as a percentage of sales?
Dollars | $ |
Percentage |
Points:
Feedback
Check My Work
Explanation
F. Determine the operating leverage. Round to one decimal place.
Points:
Feedback
Check My Work
Explanation
none
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