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:   Estimated Fixed Cost   Estimated Variable Cost (per unit sold) Production costs:             Direct materials     $24       Direct labor     16       Factory overhead $365,000     12     Selling expenses:             Sales salaries and commissions 75,800     5       Advertising 25,700             Travel 5,700             Miscellaneous selling expense 6,300     4     Administrative expenses:             Office and officers' salaries 74,100             Supplies 9,100     2       Miscellaneous administrative expense 8,540     3       Total $570,240     $66     It is expected that 5,760 units will be sold at a price of $330 a unit. Maximum sales within the relevant range are 7,000 units.

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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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:

  Estimated
Fixed Cost
  Estimated Variable Cost
(per unit sold)
Production costs:          
  Direct materials     $24    
  Direct labor     16    
  Factory overhead $365,000     12    
Selling expenses:          
  Sales salaries and commissions 75,800     5    
  Advertising 25,700          
  Travel 5,700          
  Miscellaneous selling expense 6,300     4    
Administrative expenses:          
  Office and officers' salaries 74,100          
  Supplies 9,100     2    
  Miscellaneous administrative expense 8,540     3    
  Total $570,240     $66    

It is expected that 5,760 units will be sold at a price of $330 a unit. Maximum sales within the relevant range are 7,000 units.

 

4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?
5. What is the expected margin of safety in dollars and as a percentage of sales?
Dollars:
Percentage: (Round to the nearest whole percent.)
0%
6. Determine the operating leverage. Round to one decimal place.
Transcribed Image Text:4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars: Percentage: (Round to the nearest whole percent.) 0% 6. Determine the operating leverage. Round to one decimal place.
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