PR $21-6$A Contribution margin, break$-$even sales, cost$-$volume$-$profit chart, margin of safety, and operating leverage

Blythe Industries Inc, expects to maintain the same inventories at the end of $2012$ 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 $2012.$ A summary report of these estimates is as follows:

It is expected that $8,000$ units will be sold at a price of $$200$ a unit. Maximum sales within the relevant range are $9,000$ units.

Instructions

Prepare an estimated income statement for $2012.$

What is the expected contribution margin ratio?

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

Construct a cost$-$volume$-$profit chart indicating the break$-$even sales.

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

Determine the operating leverage.

ems Series B