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	340,000			4.00
	Advertising	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.

Required:

Question Content Area

1. Prepare an estimated income statement for 20Y7.

Direct materialsIncome from operationsMiscellaneous administrative expenseSales salaries and commissionsSalesSales			$Sales
Cost of goods sold:
Direct materialsIncome from operationsSalesSuppliesTravelDirect materials		$Direct materials
AdvertisingDirect laborIncome from operationsLoss from operationsOffice and officers' salariesDirect labor		Direct labor
Factory overheadMiscellaneous administrative expenseSalesSuppliesTravelFactory overhead		Factory overhead
Cost of goods sold			fill in the blank 2255f7ffbfa704b_9
Gross profit			$fill in the blank 2255f7ffbfa704b_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 2255f7ffbfa704b_19
Administrative expenses:
AdvertisingDirect laborOffice and officers' salariesSales salaries and commissionsTravelOffice and officers' salaries	$Office and officers' salaries
Direct materialsFactory overheadSalesSuppliesTravelSupplies	Supplies
Direct materialsMiscellaneous administrative expenseMiscellaneous selling expenseSales salaries and commissionsSalesMiscellaneous administrative expense	Miscellaneous administrative expense
Total administrative expenses		fill in the blank 2255f7ffbfa704b_26
Total expenses			fill in the blank 2255f7ffbfa704b_27
Income from operations			$fill in the blank 2255f7ffbfa704b_28

Question Content Area

2. What is the expected contribution margin ratio? fill in the blank a7dc6901c020fe1_1 %

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

Units	fill in the blank a7dc6901c020fe1_2 units
Dollars	$1,800,000$1,920,000$2,100,000$2,250,000

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

$1,800,000$1,920,000$2,100,000$2,250,000

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

Dollars	$fill in the blank a7dc6901c020fe1_5
Percentage (If required, round the percent to one decimal place, e.g. 15.4%.)	fill in the blank a7dc6901c020fe1_6	%

6. Determine the operating leverage. fill in the blank a7dc6901c020fe1_7

Feedback Area