Print Item Question Content Area Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage Wolsey Industries Inc. expects to maintain the same inventories at the end of 20Y3 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 — $46 Direct labor — 40 Factory overhead $200,000 20 Selling expenses: Sales salaries and commissions 110,000 8 Advertising 40,000 — Travel 12,000 — Miscellaneous selling expense 7,600 1 Administrative expenses: Office and officers' salaries 132,000 — Supplies 10,000 4 Miscellaneous administrative expense 13,400 1 Total $525,000 $120 It is expected that 21,875 units will be sold at a price of $160 a unit. Maximum sales within the relevant range are 27,000 units. Required: Question Content Area 1. Prepare an estimated income statement for 20Y3. Wolsey Industries Inc.Estimated Income StatementFor the Year Ended December 31, 20Y3 $- Select - Cost of goods sold: $- Select - - Select - - Select - Total cost of goods sold fill in the blank e80cadfb2076fd1_9 Gross profit $fill in the blank e80cadfb2076fd1_10 Expenses: Selling expenses: $- Select - - Select - - Select - - Select - Total selling expenses $fill in the blank e80cadfb2076fd1_19 Administrative expenses: $- Select - - Select - - Select - Total administrative expenses fill in the blank e80cadfb2076fd1_26 Total expenses fill in the blank e80cadfb2076fd1_27 Operating income $fill in the blank e80cadfb2076fd1_28 Question Content Area 2. What is the expected contribution margin ratio? fill in the blank 939976fe303104c_1 % 3. Determine the break-even sales in units and dollars. Units fill in the blank 939976fe303104c_2 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 $fill in the blank 939976fe303104c_5 Percentage (If required, round the percent to one decimal place, e.g. 15.4%.) fill in the blank 939976fe303104c_6 % 6. Determine the operating leverage. If required, round your answer to one decimal place, e.g. 15.4. fill in the blank 939976fe303104c_

Print Item Question Content Area Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage Wolsey Industries Inc. expects to maintain the same inventories at the end of 20Y3 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 — $46 Direct labor — 40 Factory overhead $200,000 20 Selling expenses: Sales salaries and commissions 110,000 8 Advertising 40,000 — Travel 12,000 — Miscellaneous selling expense 7,600 1 Administrative expenses: Office and officers' salaries 132,000 — Supplies 10,000 4 Miscellaneous administrative expense 13,400 1 Total $525,000 $120 It is expected that 21,875 units will be sold at a price of $160 a unit. Maximum sales within the relevant range are 27,000 units. Required: Question Content Area 1. Prepare an estimated income statement for 20Y3. Wolsey Industries Inc.Estimated Income StatementFor the Year Ended December 31, 20Y3 $- Select - Cost of goods sold: $- Select - - Select - - Select - Total cost of goods sold fill in the blank e80cadfb2076fd1_9 Gross profit $fill in the blank e80cadfb2076fd1_10 Expenses: Selling expenses: $- Select - - Select - - Select - - Select - Total selling expenses $fill in the blank e80cadfb2076fd1_19 Administrative expenses: $- Select - - Select - - Select - Total administrative expenses fill in the blank e80cadfb2076fd1_26 Total expenses fill in the blank e80cadfb2076fd1_27 Operating income $fill in the blank e80cadfb2076fd1_28 Question Content Area 2. What is the expected contribution margin ratio? fill in the blank 939976fe303104c_1 % 3. Determine the break-even sales in units and dollars. Units fill in the blank 939976fe303104c_2 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 $fill in the blank 939976fe303104c_5 Percentage (If required, round the percent to one decimal place, e.g. 15.4%.) fill in the blank 939976fe303104c_6 % 6. Determine the operating leverage. If required, round your answer to one decimal place, e.g. 15.4. fill in the blank 939976fe303104c_

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Question Content Area

Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage

Wolsey Industries Inc. expects to maintain the same inventories at the end of 20Y3 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	—		$46
	Direct labor	—		40
	Factory overhead	$200,000			20
Selling expenses:
	Sales salaries and commissions	110,000			8
	Advertising	40,000			—
	Travel	12,000			—
	Miscellaneous selling expense	7,600			1
Administrative expenses:
	Office and officers' salaries	132,000			—
	Supplies	10,000			4
	Miscellaneous administrative expense	13,400			1
Total		$525,000			$120

It is expected that 21,875 units will be sold at a price of $160 a unit. Maximum sales within the relevant range are 27,000 units.

Required:

Question Content Area

1. Prepare an estimated income statement for 20Y3.

Wolsey Industries Inc.Estimated Income StatementFor the Year Ended December 31, 20Y3

			$- Select -
Cost of goods sold:
		$- Select -
		- Select -
		- Select -
Total cost of goods sold			fill in the blank e80cadfb2076fd1_9
Gross profit			$fill in the blank e80cadfb2076fd1_10
Expenses:
Selling expenses:
	$- Select -
	- Select -
	- Select -
	- Select -
Total selling expenses		$fill in the blank e80cadfb2076fd1_19
Administrative expenses:
	$- Select -
	- Select -
	- Select -
Total administrative expenses		fill in the blank e80cadfb2076fd1_26
Total expenses			fill in the blank e80cadfb2076fd1_27
Operating income			$fill in the blank e80cadfb2076fd1_28

Question Content Area

2. What is the expected contribution margin ratio?
fill in the blank 939976fe303104c_1 %

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

Units	fill in the blank 939976fe303104c_2 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	$fill in the blank 939976fe303104c_5
Percentage (If required, round the percent to one decimal place, e.g. 15.4%.)	fill in the blank 939976fe303104c_6	%

6. Determine the operating leverage. If required, round your answer to one decimal place, e.g. 15.4.
fill in the blank 939976fe303104c_7