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.

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.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter6: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 6PB: Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating...

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Related questions

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Question

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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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