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 $28 Direct labor 19 Factory overhead $354,100 14 Selling expenses: Sales salaries and commissions 73,600 6 Advertising 24,900 Travel 5,500 Miscellaneous selling expense 6,100 6 Administrative expenses: Office and officers' salaries 71,900 Supplies 8,900 2 Miscellaneous administrative expense 8,280 3 Total $553,280 $78 It is expected that 6,840 units will be sold at a price of $260 a unit. Maximum sales within the relevant range are 9,000 units. Required: 1. Prepare an estimated income statement for 20Y7. Belmain Co. Estimated Income Statement For the Year Ended December 31, 20Y7 $fill in the blank bdc3e006bfebf99_2 Cost of goods sold: $fill in the blank bdc3e006bfebf99_4 fill in the blank bdc3e006bfebf99_6 fill in the blank bdc3e006bfebf99_8 Cost of goods sold fill in the blank bdc3e006bfebf99_9 Gross profit $fill in the blank bdc3e006bfebf99_10 Expenses: Selling expenses: $fill in the blank bdc3e006bfebf99_12 fill in the blank bdc3e006bfebf99_14 fill in the blank bdc3e006bfebf99_16 fill in the blank bdc3e006bfebf99_18 Total selling expenses $fill in the blank bdc3e006bfebf99_19 Administrative expenses: $fill in the blank bdc3e006bfebf99_21 fill in the blank bdc3e006bfebf99_23 fill in the blank bdc3e006bfebf99_25 Total administrative expenses fill in the blank bdc3e006bfebf99_26 Total expenses fill in the blank bdc3e006bfebf99_27 Income from operations $fill in the blank bdc3e006bfebf99_28 2. What is the expected contribution margin ratio? Round to the nearest whole percent. fill in the blank f1b8bd064f81028_1 % 3. Determine the break-even sales in units and dollars. Units fill in the blank f1b8bd064f81028_2 units Dollars fill in the blank f1b8bd064f81028_3 units 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? $ fill in the blank f1b8bd064f81028_4 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars: $fill in the blank f1b8bd064f81028_5 Percentage: (Round to the nearest whole percent.) fill in the blank f1b8bd064f81028_6 % 6. Determine the operating leverage. Round to one decimal place. fill in the blank f1b8bd064f81028_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 $28 Direct labor 19 Factory overhead $354,100 14 Selling expenses: Sales salaries and commissions 73,600 6 Advertising 24,900 Travel 5,500 Miscellaneous selling expense 6,100 6 Administrative expenses: Office and officers' salaries 71,900 Supplies 8,900 2 Miscellaneous administrative expense 8,280 3 Total $553,280 $78 It is expected that 6,840 units will be sold at a price of $260 a unit. Maximum sales within the relevant range are 9,000 units. Required: 1. Prepare an estimated income statement for 20Y7. Belmain Co. Estimated Income Statement For the Year Ended December 31, 20Y7 $fill in the blank bdc3e006bfebf99_2 Cost of goods sold: $fill in the blank bdc3e006bfebf99_4 fill in the blank bdc3e006bfebf99_6 fill in the blank bdc3e006bfebf99_8 Cost of goods sold fill in the blank bdc3e006bfebf99_9 Gross profit $fill in the blank bdc3e006bfebf99_10 Expenses: Selling expenses: $fill in the blank bdc3e006bfebf99_12 fill in the blank bdc3e006bfebf99_14 fill in the blank bdc3e006bfebf99_16 fill in the blank bdc3e006bfebf99_18 Total selling expenses $fill in the blank bdc3e006bfebf99_19 Administrative expenses: $fill in the blank bdc3e006bfebf99_21 fill in the blank bdc3e006bfebf99_23 fill in the blank bdc3e006bfebf99_25 Total administrative expenses fill in the blank bdc3e006bfebf99_26 Total expenses fill in the blank bdc3e006bfebf99_27 Income from operations $fill in the blank bdc3e006bfebf99_28 2. What is the expected contribution margin ratio? Round to the nearest whole percent. fill in the blank f1b8bd064f81028_1 % 3. Determine the break-even sales in units and dollars. Units fill in the blank f1b8bd064f81028_2 units Dollars fill in the blank f1b8bd064f81028_3 units 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? $ fill in the blank f1b8bd064f81028_4 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars: $fill in the blank f1b8bd064f81028_5 Percentage: (Round to the nearest whole percent.) fill in the blank f1b8bd064f81028_6 % 6. Determine the operating leverage. Round to one decimal place. fill in the blank f1b8bd064f81028_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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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			$28
	Direct labor			19
	Factory overhead	$354,100			14
Selling expenses:
	Sales salaries and commissions	73,600			6
	Advertising	24,900
	Travel	5,500
	Miscellaneous selling expense	6,100			6
Administrative expenses:
	Office and officers' salaries	71,900
	Supplies	8,900			2
	Miscellaneous administrative expense	8,280			3
	Total	$553,280			$78

It is expected that 6,840 units will be sold at a price of $260 a unit. Maximum sales within the relevant range are 9,000 units.

Required:

1. Prepare an estimated income statement for 20Y7.

Belmain Co.
Estimated Income Statement
For the Year Ended December 31, 20Y7
			$fill in the blank bdc3e006bfebf99_2
Cost of goods sold:
		$fill in the blank bdc3e006bfebf99_4
		fill in the blank bdc3e006bfebf99_6
		fill in the blank bdc3e006bfebf99_8
Cost of goods sold			fill in the blank bdc3e006bfebf99_9
Gross profit			$fill in the blank bdc3e006bfebf99_10
Expenses:
Selling expenses:
	$fill in the blank bdc3e006bfebf99_12
	fill in the blank bdc3e006bfebf99_14
	fill in the blank bdc3e006bfebf99_16
	fill in the blank bdc3e006bfebf99_18
Total selling expenses		$fill in the blank bdc3e006bfebf99_19
Administrative expenses:
	$fill in the blank bdc3e006bfebf99_21
	fill in the blank bdc3e006bfebf99_23
	fill in the blank bdc3e006bfebf99_25
Total administrative expenses		fill in the blank bdc3e006bfebf99_26
Total expenses			fill in the blank bdc3e006bfebf99_27
Income from operations			$fill in the blank bdc3e006bfebf99_28

2. What is the expected contribution margin ratio? Round to the nearest whole percent.
fill in the blank f1b8bd064f81028_1 %

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

Units	fill in the blank f1b8bd064f81028_2 units
Dollars	fill in the blank f1b8bd064f81028_3 units

4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?
$ fill in the blank f1b8bd064f81028_4

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

Dollars:	$fill in the blank f1b8bd064f81028_5
Percentage: (Round to the nearest whole percent.)	fill in the blank f1b8bd064f81028_6	%

6. Determine the operating leverage. Round to one decimal place.
fill in the blank f1b8bd064f81028_7

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