Wolsey Industries Inc. expects to maintain the same inventories of the end of 2018 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) 1 Production costs Direct materias $46.00 Direct labor 6000 Factory overhead $200.000.00 Selling expenses: Salies salaries and commissions 110 000.00 Advertising 40,000.00 1200000 M osselling 760000 11 Administrative experts: Dice and officers' stars 132,000.00 1000000 13 Supplies Miscelatos administrative expense 110000 1.00 $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 are 27,000 units. Required: A. Prepare an estimated income statement for 20Y8. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. 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 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. Estimated Income Statement (Label) 1 Sales $3,500,000.00 2 Cost of goods sold: 5 Direct materials Direct labor $1,006,250.00 875,000.00 437,500.00 5 Factory overhead Cost of goods sold 1 Gross profit 8 Expenses: Selling expenses: Sales salaries and commissions Advertising Travel Miscellaneous selling expense Total selling expenses Administrative expenses: 15 Office and officers' salaries Supplies Miscellaneous administrative expense Total administrative expenses Total expenses 20 21 Income from operations - What is the expected contribution margin ratio? Points: 0/1 Feedback Check My Work Sales minus variable costs equals contribution margin. Contribution margin divided by sales equals contribution margin ratio C. Determine the break-even sales in units and dollars. Units units Dollars Points: Feedback Check My Work Fixed costs divided by unit contribution margin equals break-even point in units. Break-even units times unit sale price equals break-even 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 ? Dollars Percentage Points: 0/2 Feedback Check My Work (Sales minus sales at break-even) divided by sales equals margin of safety. Points: Feedback Check My Work Contribution margin divided by the income from operations equals operating leverage
