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 $22 Direct labor 14 Factory overhead $514,300 11 Selling expenses: Sales salaries and commissions 106,900 5 Advertising 36,200 Travel 8,000 Miscellaneous selling expense 8,800 4 Administrative expenses: Office and officers' salaries 104,500 Supplies 12,900 2 Miscellaneous administrative expense 12,000 2 Total $803,600 $60 It is expected that 9,840 units will be sold at a price of $200 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 $- Select - Cost of goods sold: $- Select - - Select - - Select - Cost of goods sold fill in the blank a67cf4ffefc8008_9 Gross profit $fill in the blank a67cf4ffefc8008_10 Expenses: Selling expenses: $- Select - - Select - - Select - - Select - Total selling expenses $fill in the blank a67cf4ffefc8008_19 Administrative expenses: $- Select - - Select - - Select - Total administrative expenses fill in the blank a67cf4ffefc8008_26 Total expenses fill in the blank a67cf4ffefc8008_27 Income from operations $fill in the blank a67cf4ffefc8008_28 Question Content Area 2. What is the expected contribution margin ratio? Round to the nearest whole percent. fill in the blank bb9e42029023f93_1 % 3. Determine the break-even sales in units and dollars. Units fill in the blank bb9e42029023f93_2 units Dollars fill in the blank bb9e42029023f93_3 units 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? $ fill in the blank bb9e42029023f93_4 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars: $fill in the blank bb9e42029023f93_5 Percentage: (Round to the nearest whole percent.) fill in the blank bb9e42029023f93_6 % 6. Determine the operating leverage. Round to one decimal place. fill in the blank bb9e42029023f93_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 $22 Direct labor 14 Factory overhead $514,300 11 Selling expenses: Sales salaries and commissions 106,900 5 Advertising 36,200 Travel 8,000 Miscellaneous selling expense 8,800 4 Administrative expenses: Office and officers' salaries 104,500 Supplies 12,900 2 Miscellaneous administrative expense 12,000 2 Total $803,600 $60 It is expected that 9,840 units will be sold at a price of $200 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 $- Select - Cost of goods sold: $- Select - - Select - - Select - Cost of goods sold fill in the blank a67cf4ffefc8008_9 Gross profit $fill in the blank a67cf4ffefc8008_10 Expenses: Selling expenses: $- Select - - Select - - Select - - Select - Total selling expenses $fill in the blank a67cf4ffefc8008_19 Administrative expenses: $- Select - - Select - - Select - Total administrative expenses fill in the blank a67cf4ffefc8008_26 Total expenses fill in the blank a67cf4ffefc8008_27 Income from operations $fill in the blank a67cf4ffefc8008_28 Question Content Area 2. What is the expected contribution margin ratio? Round to the nearest whole percent. fill in the blank bb9e42029023f93_1 % 3. Determine the break-even sales in units and dollars. Units fill in the blank bb9e42029023f93_2 units Dollars fill in the blank bb9e42029023f93_3 units 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? $ fill in the blank bb9e42029023f93_4 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars: $fill in the blank bb9e42029023f93_5 Percentage: (Round to the nearest whole percent.) fill in the blank bb9e42029023f93_6 % 6. Determine the operating leverage. Round to one decimal place. fill in the blank bb9e42029023f93_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

			$- Select -
Cost of goods sold:

		$- Select -

		- Select -

	- Select -
Cost of goods sold		fill in the blank a67cf4ffefc8008_9
Gross profit		$fill in the blank a67cf4ffefc8008_10
Expenses:
Selling expenses:

	$- Select -

	- Select -

	- Select -

	- Select -
Total selling expenses		$fill in the blank a67cf4ffefc8008_19
Administrative expenses:

	$- Select -

	- Select -

	- Select -
Total administrative expenses		fill in the blank a67cf4ffefc8008_26
Total expenses			fill in the blank a67cf4ffefc8008_27
Income from operations			$fill in the blank a67cf4ffefc8008_28

Question Content Area

2. What is the expected contribution margin ratio? Round to the nearest whole percent.
fill in the blank bb9e42029023f93_1 %

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

Units	fill in the blank bb9e42029023f93_2 units
Dollars	fill in the blank bb9e42029023f93_3 units

4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?
$ fill in the blank bb9e42029023f93_4

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

Dollars:	$fill in the blank bb9e42029023f93_5
Percentage: (Round to the nearest whole percent.)	fill in the blank bb9e42029023f93_6	%

6. Determine the operating leverage. Round to one decimal place.
fill in the blank bb9e42029023f93_7

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	Estimated Fixed Cost		Estimated Variable Cost (per unit sold)
Production costs:
	Direct materials			$22
	Direct labor			14
	Factory overhead	$514,300			11
Selling expenses:
	Sales salaries and commissions	106,900			5
	Advertising	36,200
	Travel	8,000
	Miscellaneous selling expense	8,800			4
Administrative expenses:
	Office and officers' salaries	104,500
	Supplies	12,900			2
	Miscellaneous administrative expense	12,000			2
	Total	$803,600			$60