Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating LeverageBelmain 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: EstimatedFixedCost EstimatedVariableCost(perunitsold)Production costs: Direct materials $26 Direct labor 17 Factory overhead$564,000 13 Selling expenses: Sales salaries and commissions117,200 6 Advertising39,700 Travel8,800 Miscellaneous selling expense9,700 5 Administrative expenses: Office and officers' salaries114,600 Supplies14,100 2 Miscellaneous administrative expense13,180 3 Total$881,280 $72 It is expected that 7,480 units will be sold at a price of $288 a unit. Maximum sales within the relevant range are 9,000 units.Required: 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?$ fill in the blank b7c0ddf9dfdc000_45. What is the expected margin of safety in dollars and as a percentage of sales?Dollars:$fill in the blank b7c0ddf9dfdc000_5 Percentage: (Round to the nearest whole percent.)fill in the blank b7c0ddf9dfdc000_6%6. Determine the operating leverage. Round to one decimal place.fill in the blank b7c0ddf9dfdc000_7

Formula: Contribution margin = Sales - variable cost.

Answered: Contribution Margin, Break-Even Sales,…

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 Fixed Cost		Estimated Variable Cost (per unit sold)
Production costs:
	Direct materials			$26
	Direct labor			17
	Factory overhead	$564,000			13
Selling expenses:
	Sales salaries and commissions	117,200			6
	Advertising	39,700
	Travel	8,800
	Miscellaneous selling expense	9,700			5
Administrative expenses:
	Office and officers' salaries	114,600
	Supplies	14,100			2
	Miscellaneous administrative expense	13,180			3
	Total	$881,280			$72