Wolsey Industries Inc. expects to maintain the same inventories at the end of 20Y8 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: 1 Estimated Fixed Cost Estimated Variable Cost (per unit sold) 2 Production costs: 3 Direct materials — $46.00 4 Direct labor — 40.00 5 Factory overhead $200,000.00 20.00 6 Selling expenses: 7 Sales salaries and commissions 110,000.00 8.00 8 Advertising 40,000.00 — 9 Travel 12,000.00 — 10 Miscellaneous selling expense 7,600.00 1.00 11 Administrative expenses: 12 Office and officers’ salaries 132,000.00 — 13 Supplies 10,000.00 4.00 14 Miscellaneous administrative expense 13,400.00 1.00 15 Total $525,000.00 $120.00 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: A. Prepare an estimated income statement for 20Y8. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the statement heading. B. What is the expected contribution margin ratio? C. Determine the break-even sales in units and dollars. D. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? E. What is the expected margin of safety in dollars and as a percentage of sales? F. Determine the operating leverage. Round to one decimal place.

Name: Wolsey Industries Inc. expects to maintain the same inventories at the
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Description: Wolsey Industries Inc. expects to maintain the same inventories at the end of 20Y8 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 vari

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Wolsey Industries Inc. expects to maintain the same inventories at the end of 20Y8 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:

1		Estimated Fixed Cost	Estimated Variable Cost (per unit sold)
2	Production costs:
3	Direct materials	—	$46.00
4	Direct labor	—	40.00
5	Factory overhead	$200,000.00	20.00
6	Selling expenses:
7	Sales salaries and commissions	110,000.00	8.00
8	Advertising	40,000.00	—
9	Travel	12,000.00	—
10	Miscellaneous selling expense	7,600.00	1.00
11	Administrative expenses:
12	Office and officers’ salaries	132,000.00	—
13	Supplies	10,000.00	4.00
14	Miscellaneous administrative expense	13,400.00	1.00
15	Total	$525,000.00	$120.00

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:
A.	Prepare an estimated income statement for 20Y8. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Be sure to complete the statement heading.
B.	What is the expected contribution margin ratio?
C.	Determine the break-even sales in units and dollars.
D.	Construct a cost-volume-profit chart on your own paper. What is the break-even sales?
E.	What is the expected margin of safety in dollars and as a percentage of sales?
F.	Determine the operating leverage. Round to one decimal place.

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What are the answers for the following?

	Construct a cost-volume-profit chart on your own paper. What is the break-even sales?
	What is the expected margin of safety in dollars and as a percentage of sales?
	Determine the operating leverage. Round to one decimal place.

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