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 Estimated Variable Cost Fixed Cost (per unit sold) Production costs: Direct materials $28 Direct labor 19 Factory overhead $139,800 14 Selling expenses: Sales salaries and commissions 29,000 Advertising 9,800 Travel 2,200 Miscellaneous selling expense 2,400 6. Administrative expenses: Office and officers' salaries 28,400 Supplies 3,500 Miscellaneous administrative expense 3,300 3 Total $218,400 $78 It is expected that 6,300 units will be sold at a price of $156 a unit. Maximum sales within the relevant range are 8,000 units. Required: 1. Prepare an estimated income statement for 20Y7. Belmain Co. Estimated Income Statement For the Year Ended December 31, 20Y7 Sales 982,800 Cost of goods sold: Direct materials 176,400 Direct labor 119,700 Factory overhead 228,000 Total cost of goods sold -524,100 Gross profit 458,700 Expenses: Selling expenses: Sales salaries and commissions 66,B00 Advertising 9,B00 Travel 2,200 Miscellaneous selling expense 40,200 Total selling expenses 119,000 Administrative expenses: Office and officers' salaries 28,400 Supplies 16,100 Miscellaneous administrative expense 22,200 Total administrative expenses 66,700 Total expenses -185,700 Income from operations 273,000 2. What is the expected contribution margin ratio? Round to the nearest whole percent. 61 % 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.
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 Estimated Variable Cost Fixed Cost (per unit sold) Production costs: Direct materials $28 Direct labor 19 Factory overhead $139,800 14 Selling expenses: Sales salaries and commissions 29,000 Advertising 9,800 Travel 2,200 Miscellaneous selling expense 2,400 6. Administrative expenses: Office and officers' salaries 28,400 Supplies 3,500 Miscellaneous administrative expense 3,300 3 Total $218,400 $78 It is expected that 6,300 units will be sold at a price of $156 a unit. Maximum sales within the relevant range are 8,000 units. Required: 1. Prepare an estimated income statement for 20Y7. Belmain Co. Estimated Income Statement For the Year Ended December 31, 20Y7 Sales 982,800 Cost of goods sold: Direct materials 176,400 Direct labor 119,700 Factory overhead 228,000 Total cost of goods sold -524,100 Gross profit 458,700 Expenses: Selling expenses: Sales salaries and commissions 66,B00 Advertising 9,B00 Travel 2,200 Miscellaneous selling expense 40,200 Total selling expenses 119,000 Administrative expenses: Office and officers' salaries 28,400 Supplies 16,100 Miscellaneous administrative expense 22,200 Total administrative expenses 66,700 Total expenses -185,700 Income from operations 273,000 2. What is the expected contribution margin ratio? Round to the nearest whole percent. 61 % 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.
Managerial Accounting
15th Edition
ISBN:9781337912020
Author:Carl Warren, Ph.d. Cma William B. Tayler
Publisher:Carl Warren, Ph.d. Cma William B. Tayler
Chapter6: Cost-volume-profit Analysis
Section: Chapter Questions
Problem 6PB: Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating...
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