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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 $20$Y$7$ 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:$$Direct materials$$$$13$Direct labor$9$Factory overhead$$232,2006$Selling expenses:$$Sales salaries and commissions$48,3003$Advertising$16,300$Travel$3,600$Miscellaneous selling expense$4,0003$Administrative expenses:$$Office and officers' salaries$47,200$Supplies$5,8001$Miscellaneous administrative expense$5,4801$Total$$362,880$$$36$

It is expected that $7,560$ units will be sold at a price of $$144$ a unit. Maximum sales within the relevant range are $9,000$ units.

Required:

Question Content Area

$1.$ Prepare an estimated income statement for $20$Y$7.$

Belmain Co$.$

Estimated Income Statement

For the Year Ended December $31,20$Y$7$

Direct materialsIncome from operationsMiscellaneous administrative expenseSales salaries and commissionsSales

$$-$ Select $-$Cost of goods sold:

Direct materialsIncome from operationsSalesSuppliesTravel

$$-$ Select $-$

AdvertisingDirect laborIncome from operationsLoss from operationsOffice and officers' salaries

$-$ Select $-$

Factory overheadMiscellaneous administrative expenseSalesSuppliesTravel

$-$ Select $-$Cost of goods soldfill in the blank $17843306$c$004028\_9$Gross profit$fill in the blank $17843306$c$004028\_10$Expenses:Selling expenses:

Factory overheadIncome from operationsMiscellaneous administrative expenseSales salaries and commissionsSales

$$-$ Select $-$

AdvertisingCost of goods manufacturedDirect materialsOffice and officers' salariesSales

$-$ Select $-$

Direct laborFactory overheadSalesSuppliesTravel

$-$ Select $-$

Direct materialsMiscellaneous administrative expenseMiscellaneous selling expenseSalesSupplies

$-$ Select $-$Total selling expenses$fill in the blank $17843306$c$004028\_19$Administrative expenses:

AdvertisingDirect laborOffice and officers' salariesSales salaries and commissionsTravel

$$-$ Select $-$

Direct materialsFactory overheadSalesSuppliesTravel

$-$ Select $-$

Direct materialsMiscellaneous administrative expenseMiscellaneous selling expenseSales salaries and commissionsSales

$-$ Select $-$Total administrative expensesfill in the blank $17843306$c$004028\_26$Total expensesfill in the blank $17843306$c$004028\_27$Income from operations$fill in the blank $17843306$c$004028\_28$

Question Content Area

$2.$What is the expected contribution margin ratio? Round to the nearest whole percent.

fill in the blank c$1$fc$4$e$09$f$03$c$005\_1\%$

$3.$Determine the break$-$even sales in units and dollars.

Unitsfill in the blank c$1$fc$4$e$09$f$03$c$005\_2$ unitsDollarsfill in the blank c$1$fc$4$e$09$f$03$c$005\_3$ units

$4.$Construct a cost$-$volume$-$profit chart on your own paper. What is the break$-$even sales?

$ fill in the blank c$1$fc$4$e$09$f$03$c$005\_4$

$5.$What is the expected margin of safety in dollars and as a percentage of sales?

Dollars:$fill in the blank c$1$fc$4$e$09$f$03$c$005\_5$Percentage: $($Round to the nearest whole percent.$)$fill in the blank c$1$fc$4$e$09$f$03$c$005\_6\%$

$6.$Determine the operating leverage. Round to one decimal place.

fill in the blank c$1$fc$4$e$09$f$03$c$005\_7$ Contribution Margin, Break$-$Even Sales, Cost$-$Volume$-$Profit Chart, Margin of Safety, and Operating Leverage 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: Production costs:

Administrative expenses:

It is expected that $7,560$ units will be sold at a price of $\backslash (\backslash$$ $144\backslash )$ a unit. Maximum sales within the relevant range are $9,000$ units. $1.$ Prepare an estimated income statement for $20$ Y $7.$

Belmain Co$.$

Estimated Income Statement

For the Year Ended December $31,20$ Y $7$

Cost of goods sold:

Cost of goods sold

Gross profit

Expenses:

Selling expenses:

Total selling expenses Total administrative expenses

Total expenses

Income from operations

$2.$ What is the expected contribution margin ratio? Round to the nearest whole percent.

$\backslash \%$

$3.$ Determine the break$-$even sales in units and dollars.

Units units

Dollars units

$4.$ Construct a cost$-$volume$-$profit chart on your own paper. What is the break$-$even sales?

$\backslash$$

$5.$ What is the expected margin of safety in dollars and as a percentage of sales?

Dollars:

Percentage: $($Round to the nearest whole percent.$)$

$6.$ Determine the operating leverage. Round to one decimal place.