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Contribution Hargin, 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 2017 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 Variable Cost Estimated (per Fixed unit Cost sold) Production costs: Direct materials $19 ) Direct labor 13 Factory overhead $209,300 10 Selling expenses: Sales salaries and commissions 60,100 Advertising 20,300 Travel 4,500 Miscellaneous selling expense 5,000 Administrative expenses: Ofice and officers' salaries 58,00 Supplies 7,200 Miscellaneous administrative expense 6,780 Total $451,900 $54 It is expected that 8,680 units will be sold at a price of $135 a unit. Maximum sales within the relevant range are 11,000 units. Required: 1. Prepare an estimated income statement for 20Y7. Belmain Co. Estimated Income Statement

Contribution Hargin, 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 2017 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 Variable Cost Estimated (per Fixed unit Cost sold) Production costs: Direct materials $19 ) Direct labor 13 Factory overhead $209,300 10 Selling expenses: Sales salaries and commissions 60,100 Advertising 20,300 Travel 4,500 Miscellaneous selling expense 5,000 Administrative expenses: Ofice and officers' salaries 58,00 Supplies 7,200 Miscellaneous administrative expense 6,780 Total $451,900 $54 It is expected that 8,680 units will be sold at a price of $135 a unit. Maximum sales within the relevant range are 11,000 units. Required: 1. Prepare an estimated income statement for 20Y7. Belmain Co. Estimated Income Statement

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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 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 Variable Cost Estimated (per Fixed unit Cost sold) Production costs: Direct materials $19 ) Direct labor 13 Factory overhead $289,300 10 Selling expenses: Sales salaries and commissions 60,100 4 Advertising 20,300 Travel 4,500 Miscellaneous selling expense 5,000 Administrative expenses: Office and officers' salaries 58,800 Supplies 7,200 2 Miscellaneous administrative expense 6,780 2 Total $451,980 $54 It is expected that 8,680 units will be sold at a price of $135 a unit. Maximum sales within the relevant range are 11,000 units. Required: 1. Prepare an estimated income statement for 20Y7. Belmain Co. Estimated Income Statement For the Year Ended December 31, 20Y7 Sales 1.171.800 Cost of goods sold: Direct materials Direct labor 164.920 112,840 Factory overhead 376.100 Cost of goods sold 653,860 Gross profit 517,940 Expenses: Selling expenses: Sales salaries and commissions 94.820 Advertising 20,300 Travel 4.500 Miscellaneous selling expense 39,720 Total selling expenses 159.340 Administrative expenses: Office and officers' salaries 58,800 Supplies 24.560 Miscellaneous administrative expense 24,140
Transcribed Image Text: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 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 Variable Cost Estimated (per Fixed unit Cost sold) Production costs: Direct materials $19 ) Direct labor 13 Factory overhead $289,300 10 Selling expenses: Sales salaries and commissions 60,100 4 Advertising 20,300 Travel 4,500 Miscellaneous selling expense 5,000 Administrative expenses: Office and officers' salaries 58,800 Supplies 7,200 2 Miscellaneous administrative expense 6,780 2 Total $451,980 $54 It is expected that 8,680 units will be sold at a price of $135 a unit. Maximum sales within the relevant range are 11,000 units. Required: 1. Prepare an estimated income statement for 20Y7. Belmain Co. Estimated Income Statement For the Year Ended December 31, 20Y7 Sales 1.171.800 Cost of goods sold: Direct materials Direct labor 164.920 112,840 Factory overhead 376.100 Cost of goods sold 653,860 Gross profit 517,940 Expenses: Selling expenses: Sales salaries and commissions 94.820 Advertising 20,300 Travel 4.500 Miscellaneous selling expense 39,720 Total selling expenses 159.340 Administrative expenses: Office and officers' salaries 58,800 Supplies 24.560 Miscellaneous administrative expense 24,140
Total administrative expenses 107,500 Total expenses 266,840 Income from operations 451,980 2. What is the expected contribution margin ratio? Round to the nearest whole percent. 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? 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.
Transcribed Image Text:Total administrative expenses 107,500 Total expenses 266,840 Income from operations 451,980 2. What is the expected contribution margin ratio? Round to the nearest whole percent. 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? 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.
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