19(5)-6B Name: Section: Score: 0% Key Code: [Key code here] Instructions Answers are entered in the cells with gray backgrounds. Cells with non-gray backgrounds are protected and cannot be edited. An asterisk (*) will appear to the right of an incorrect entry. 1. Belmain Co. Estimated Income Statement For the Year Ended December 31, 2017 Sales Cost of goods sold: Direct materials Direct labor Factory overhead Cost of goods sold Gross profit Expenses: Selling expenses Sales salaries and commissions Advertising Travel Miscellaneous selling expense Total selling expenses Administrative expenses: Office and officers' salaries Supplies Miscellaneous administrative expense Total administrative expenses Total expenses Income from operations $ 50 50 50 $ 50 50 $ 5 2. Contribution margin ratio: Sales Variable costs Contribution margin Sales Contribution margin ratio 3. Break-even sales: Fixed costs Unit contribution margin Break-even sales (units) Sale price Break-even sales (dollars) Units x Unit Variable Cost 8,000 $8,000 Sale Price Unit Variable Cost 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 $ 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Operating Loss Area Break-Even Point 5. Margin of safety: 6. Operating Profit Area Sale Price Units Expected sales Break-even point Margin of safety (in dollars) Expected sales Margin of safety (as a percentage of sales) Operating leverage: Contribution margin Income from operations Operating leverage Unit CM $ Units Cost-Volume-Profit Chart $1 $1 $1 $0 $0 $- 0 2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 Units Sales and Costs Sales $ -Costs $ PR 5-6B Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating leverage Obj. 2, 3, 4, 5 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: EXCEL TEMPLATE Estimated Fixed Cost Estimated Variable Cost + (per unit sold) Production costs: Direct materials $50.00 Direct labor..... 30.00 Factory overhead $ 350,000 6.00 Selling expenses: Sales salaries and commissions.... Advertising.. 340,000 4.00 116,000 Travel....... 4,000 - Miscellaneous selling expense 2,300 1.00 Administrative expenses: Office and officers' salaries... 325,000 Supplies..... 6,000 4.00 Miscellaneous administrative expense. 8,700 1.00 Total ... $1,152,000 $96.00 It is expected that 12,000 units will be sold at a price of $240 a unit. Maximum sales within the relevant range are 18,000 units. Instructions 1. Prepare an estimated income statement for 20Y7. 2. What is the expected contribution margin ratio? 3. Determine the break-even sales in units and dollars. Answer Check Figure: 8,000 units 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? (Round to one decimal place.) 6. Determine the operating leverage