Production Costs MaBak Inc. expects to maintain the same inventories at the end of 2020 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 Total Sales Cost of goods sold: Direct materials Direct labor Factory overhead Cost of goods sold Gross profit Expenses: Selling expenses 1. Prepare an estimated income statement for 2020. Operating Income = $700,000 2. What is the expected contribution margin ratio? 3. Determine the break-even sales in units and dollars. $237,500 Sales salaries 4. What is the expected margin of safety in dollars and as a percentage of sales? 87.5% 5. Determine the operating leverage. Advertising Travel Misc. selling expense It is expected that 20,000 units will be sold at a price of $95 a unit. Maximum sales within the relevant range are 21,000 units. Instructions Administrative expenses: Estimated Fixed Cost $52,000 Office and officers' salaries. Total expenses Income from operations 10,000 8,000 2,500 1,500 22,500 2,000 1,500 $100,000 Supplies Misc. admin expense Total administrative expense M. Baker Page 1 Accounting IB Written Assignment Chapter 20- Cost-Volume-Profit Analysis Estimated Variable Cost MaBak Inc. Estimated Income Statement For the Year Ended December 31, 2020 (per unit sold) $25 10 2 9 3 $55
Production Costs MaBak Inc. expects to maintain the same inventories at the end of 2020 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 Total Sales Cost of goods sold: Direct materials Direct labor Factory overhead Cost of goods sold Gross profit Expenses: Selling expenses 1. Prepare an estimated income statement for 2020. Operating Income = $700,000 2. What is the expected contribution margin ratio? 3. Determine the break-even sales in units and dollars. $237,500 Sales salaries 4. What is the expected margin of safety in dollars and as a percentage of sales? 87.5% 5. Determine the operating leverage. Advertising Travel Misc. selling expense It is expected that 20,000 units will be sold at a price of $95 a unit. Maximum sales within the relevant range are 21,000 units. Instructions Administrative expenses: Estimated Fixed Cost $52,000 Office and officers' salaries. Total expenses Income from operations 10,000 8,000 2,500 1,500 22,500 2,000 1,500 $100,000 Supplies Misc. admin expense Total administrative expense M. Baker Page 1 Accounting IB Written Assignment Chapter 20- Cost-Volume-Profit Analysis Estimated Variable Cost MaBak Inc. Estimated Income Statement For the Year Ended December 31, 2020 (per unit sold) $25 10 2 9 3 $55
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:Production Costs
MaBak Inc. expects to maintain the same inventories at the end of 2020 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
Total
Sales
Cost of goods sold:
Direct materials
Direct labor
Factory overhead
Cost of goods sold
Gross profit
Expenses:
1. Prepare an estimated income statement for 2020. Operating Income = $700,000
2. What is the expected contribution margin ratio?
3. Determine the break-even sales in units and dollars. $237,500
Selling expenses
4. What is the expected margin of safety in dollars and as a percentage of sales? 87.5%
5. Determine the operating leverage.
Sales salaries
Advertising
Travel
Misc. selling expense
It is expected that 20,000 units will be sold at a price of $95 a unit. Maximum sales within the relevant range are
21,000 units.
Instructions
Administrative expenses:
Estimated
Fixed Cost
$52,000
10,000
8,000
2,500
1,500
22,500
2,000
1,500
$100,000
Office and officers' salaries.
Total expenses
Income from operations
Supplies
Misc. admin expense
Total administrative expense
Accounting IB
Written Assignment
Chapter 20- Cost-Volume-Profit Analysis
Estimated
Variable Cost
M. Baker
Page 1
MaBak Inc.
Estimated Income Statement
For the Year Ended December 31, 2020
(per unit sold)
$25
10
2
9
3
$55
Transcribed Image Text:Contribution margin ratio:
Sales
Variable costs
Contribution margin
Sales
Contribution margin
ratio
Break-even sales:
Fixed costs
Unit contribution margin
Break-even sales (units)
Sale price
Break-even sales (dollars)
Margin of safety:
Units
Operating leverage:
Expected sales
Break-even point
Margin of safety (in dollars)
Contribution margin
Income from operations
Operating leverage
Sale Price
Accounting 1B
Written Assignment
Chapter 20 Cost-Volume-Profit Analysis
M. Baker
Page 2
Expected sales
Margin of safety (as a percentage of sales)
Unit Variable Cost
Sale Price
Unit Variable Cost
Unit CM $
Units
Units
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