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 Fixed Cost Estimated Variable Cost (per unit sold) Production costs: Direct materials — $24 Direct labor — 16 Factory overhead $538,100 12 Selling expenses: Sales salaries and commissions 111,800 5 Advertising 37,800 — Travel 8,400 — Miscellaneous selling expense 9,200 4 Administrative expenses: Office and officers' salaries 109,300 — Supplies 13,500 2 Miscellaneous administrative expense 12,740 3 Total $840,840 $66 It is expected that 9,360 units will be sold at a price of $220 a unit. Maximum sales within the relevant range are 12,000 units. Required: Question Content Area 1. Prepare an estimated income statement for 20Y7. Belmain Co.Estimated Income StatementFor the Year Ended December 31, 20Y7 $Sales Cost of goods sold: $Direct materials Direct labor Factory overhead Total cost of goods sold fill in the blank 6a379e0c2fba044_9 Gross profit $fill in the blank 6a379e0c2fba044_10 Expenses: Selling expenses: $Sales salaries and commissions Advertising Travel Miscellaneous selling expense Total selling expenses $fill in the blank 6a379e0c2fba044_19 Administrative expenses: $Office and officers' salaries Supplies Miscellaneous administrative expense Total administrative expenses fill in the blank 6a379e0c2fba044_26 Total expenses fill in the blank 6a379e0c2fba044_27 Operating income $fill in the blank 6a379e0c2fba044_28 Question Content Area 2. What is the expected contribution margin ratio? Round to the nearest whole percent. fill in the blank ce8133f58f8901a_1 % 3. Determine the break-even sales in units and dollars. Units fill in the blank ce8133f58f8901a_2 units Dollars $fill in the blank ce8133f58f8901a_3 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? $ fill in the blank ce8133f58f8901a_4 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars: $fill in the blank ce8133f58f8901a_5 Percentage: (Round to the nearest whole percent.) fill in the blank ce8133f58f8901a_6 % 6. Determine the operating leverage. Round to one decimal place. fill in the blank ce8133f58f8901a_7

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 Fixed Cost Estimated Variable Cost (per unit sold) Production costs: Direct materials — $24 Direct labor — 16 Factory overhead $538,100 12 Selling expenses: Sales salaries and commissions 111,800 5 Advertising 37,800 — Travel 8,400 — Miscellaneous selling expense 9,200 4 Administrative expenses: Office and officers' salaries 109,300 — Supplies 13,500 2 Miscellaneous administrative expense 12,740 3 Total $840,840 $66 It is expected that 9,360 units will be sold at a price of $220 a unit. Maximum sales within the relevant range are 12,000 units. Required: Question Content Area 1. Prepare an estimated income statement for 20Y7. Belmain Co.Estimated Income StatementFor the Year Ended December 31, 20Y7 $Sales Cost of goods sold: $Direct materials Direct labor Factory overhead Total cost of goods sold fill in the blank 6a379e0c2fba044_9 Gross profit $fill in the blank 6a379e0c2fba044_10 Expenses: Selling expenses: $Sales salaries and commissions Advertising Travel Miscellaneous selling expense Total selling expenses $fill in the blank 6a379e0c2fba044_19 Administrative expenses: $Office and officers' salaries Supplies Miscellaneous administrative expense Total administrative expenses fill in the blank 6a379e0c2fba044_26 Total expenses fill in the blank 6a379e0c2fba044_27 Operating income $fill in the blank 6a379e0c2fba044_28 Question Content Area 2. What is the expected contribution margin ratio? Round to the nearest whole percent. fill in the blank ce8133f58f8901a_1 % 3. Determine the break-even sales in units and dollars. Units fill in the blank ce8133f58f8901a_2 units Dollars $fill in the blank ce8133f58f8901a_3 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? $ fill in the blank ce8133f58f8901a_4 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars: $fill in the blank ce8133f58f8901a_5 Percentage: (Round to the nearest whole percent.) fill in the blank ce8133f58f8901a_6 % 6. Determine the operating leverage. Round to one decimal place. fill in the blank ce8133f58f8901a_7

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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Question Content Area

1. Prepare an estimated income statement for 20Y7.

Belmain Co.Estimated Income StatementFor the Year Ended December 31, 20Y7

			$Sales
Cost of goods sold:
		$Direct materials
		Direct labor
		Factory overhead
Total cost of goods sold			fill in the blank 6a379e0c2fba044_9
Gross profit			$fill in the blank 6a379e0c2fba044_10
Expenses:
Selling expenses:
	$Sales salaries and commissions
	Advertising
	Travel
	Miscellaneous selling expense
Total selling expenses		$fill in the blank 6a379e0c2fba044_19
Administrative expenses:
	$Office and officers' salaries
	Supplies
	Miscellaneous administrative expense
Total administrative expenses		fill in the blank 6a379e0c2fba044_26
Total expenses			fill in the blank 6a379e0c2fba044_27
Operating income			$fill in the blank 6a379e0c2fba044_28

Question Content Area

2. What is the expected contribution margin ratio? Round to the nearest whole percent.
fill in the blank ce8133f58f8901a_1 %

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

Units	fill in the blank ce8133f58f8901a_2 units
Dollars	$fill in the blank ce8133f58f8901a_3

4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?
$ fill in the blank ce8133f58f8901a_4

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

Dollars:	$fill in the blank ce8133f58f8901a_5
Percentage: (Round to the nearest whole percent.)	fill in the blank ce8133f58f8901a_6	%

6. Determine the operating leverage. Round to one decimal place.
fill in the blank ce8133f58f8901a_7

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	Estimated Fixed Cost		Estimated Variable Cost (per unit sold)
Production costs:
	Direct materials	—		$24
	Direct labor	—		16
	Factory overhead	$538,100			12
Selling expenses:
	Sales salaries and commissions	111,800			5
	Advertising	37,800			—
	Travel	8,400			—
	Miscellaneous selling expense	9,200			4
Administrative expenses:
	Office and officers' salaries	109,300			—
	Supplies	13,500			2
	Miscellaneous administrative expense	12,740			3
	Total	$840,840			$66