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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 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 costs for their departments during the year. A summary report of these estimates is as follows: Estimated Variable Cost Fixed Cost (per unit sold) Production costs: Direct materials Direct labor Factory overhead Selling expenses: Sales salaries and commissions Advertising Travel Miscellaneous selling expense Administrative expenses: Office and Office and officers' salaries Supplies Miscellaneous administrative expense Estimated Total $195,100 40,600 13,700 3,000 3,400 39,600 4,900 4,620 $24 16 12 5 2 3 $304,920 $66 t is expected that 5,280 units will be sold at a price of $220 a unit. Maximum sales within the relevant range are 7,000 units.

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 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 costs for their departments during the year. A summary report of these estimates is as follows: Estimated Variable Cost Fixed Cost (per unit sold) Production costs: Direct materials Direct labor Factory overhead Selling expenses: Sales salaries and commissions Advertising Travel Miscellaneous selling expense Administrative expenses: Office and Office and officers' salaries Supplies Miscellaneous administrative expense Estimated Total $195,100 40,600 13,700 3,000 3,400 39,600 4,900 4,620 $24 16 12 5 2 3 $304,920 $66 t is expected that 5,280 units will be sold at a price of $220 a unit. Maximum sales within the relevant range are 7,000 units.

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: Production costs: Direct materials Direct labor Factory overhead Selling expenses: Sales salaries and commissions Advertising Travel Miscellaneous selling expense Administrative expenses: Office and officers' salaries Supplies Miscellaneous administrative expense Estimated Fixed Cost $195,100 40,600 13,700 3,000 3,400 39,600 4,900 4,620 Estimated Variable Cost (per unit sold) $24 16 12 5 4 2 3 Total $304,920 $66 It is expected that 5,280 units will be sold at a price of $220 a unit. Maximum sales within the relevant range are 7,000 units.
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: Production costs: Direct materials Direct labor Factory overhead Selling expenses: Sales salaries and commissions Advertising Travel Miscellaneous selling expense Administrative expenses: Office and officers' salaries Supplies Miscellaneous administrative expense Estimated Fixed Cost $195,100 40,600 13,700 3,000 3,400 39,600 4,900 4,620 Estimated Variable Cost (per unit sold) $24 16 12 5 4 2 3 Total $304,920 $66 It is expected that 5,280 units will be sold at a price of $220 a unit. Maximum sales within the relevant range are 7,000 units.
Requieu. 1. Prepare an estimated income statement for 2017. Belmain Co. Estimated Income Statement For the Year Ended December 31, 20Y7 Line Item Description ▼ Cost of goods sold: Total cost of goods sold Gross profit Expenses: Selling expenses: Total selling expenses Administrative expenses: Total administrative expenses Total expenses Operating income Amount Amount Amount 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 $ 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:Requieu. 1. Prepare an estimated income statement for 2017. Belmain Co. Estimated Income Statement For the Year Ended December 31, 20Y7 Line Item Description ▼ Cost of goods sold: Total cost of goods sold Gross profit Expenses: Selling expenses: Total selling expenses Administrative expenses: Total administrative expenses Total expenses Operating income Amount Amount Amount 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 $ 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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