Wolsey Industries Inc. expects to maintain the same inventories at the end of 2016 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 2016. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. 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.     Labels and Amount Descriptions     Labels and Amount Descriptions   Advertising   Contribution margin   Cost of goods sold   Direct labor   Direct materials   Expenses   Factory overhead   Gross profit   Income from operations   Manufacturing margin   Miscellaneous administrative expense   Miscellaneous selling expense   Office and officers’ salaries   Sales   Sales salaries and commissions   Supplies   Total administrative expenses   Total expenses   Total selling expenses   Travel   Variable cost of goods sold       Income Statement     A. Prepare an estimated income statement for 2016. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries.   Wolsey Industries Inc. Estimated Income Statement For the Year Ended December 31, 2016 1         2         3         4         5         6         7         8         9 Selling expenses:       10         11         12         13         14         15 Administrative expenses:       16         17         18         19         20 Total expenses       21                 Additional Questions     B. What is the expected contribution margin ratio?     C. Determine the break-even sales in units and dollars. Units    units Dollars       D. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?         Final Questions     E. What is the expected margin of safety in dollars and as a percentage of sales? Dollars $   Percentage     F. Determine the operating leverage. Round to one decimal place.

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 2016 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 2016. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries.
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.
 
 
Labels and Amount Descriptions
 
 
Labels and Amount Descriptions  
Advertising  
Contribution margin  
Cost of goods sold  
Direct labor  
Direct materials  
Expenses  
Factory overhead  
Gross profit  
Income from operations  
Manufacturing margin  
Miscellaneous administrative expense  
Miscellaneous selling expense  
Office and officers’ salaries  
Sales  
Sales salaries and commissions  
Supplies  
Total administrative expenses  
Total expenses  
Total selling expenses  
Travel  
Variable cost of goods sold  
 
 
Income Statement
 
 
A. Prepare an estimated income statement for 2016. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries.
 
Wolsey Industries Inc.
Estimated Income Statement
For the Year Ended December 31, 2016
1
 
 
 
 
2
 
 
 
 
3
 
 
 
 
4
 
 
 
 
5
 
 
 
 
6
 
 
 
 
7
 
 
 
 
8
 
 
 
 
9
Selling expenses:
 
 
 
10
 
 
 
 
11
 
 
 
 
12
 
 
 
 
13
 
 
 
 
14
 
 
 
 
15
Administrative expenses:
 
 
 
16
 
 
 
 
17
 
 
 
 
18
 
 
 
 
19
 
 
 
 
20
Total expenses
 
 
 
21
 
 
 
 
 
 
 
 
Additional Questions
 
 
B. What is the expected contribution margin ratio?
 
 
C. Determine the break-even sales in units and dollars.
Units
 
 units
Dollars    
 
D. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?
   
 
 
Final Questions
 
 
E. What is the expected margin of safety in dollars and as a percentage of sales?
Dollars $
 
Percentage
 
 
F. Determine the operating leverage. Round to one decimal place.
 
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