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: 1 Estimated Fixed Cost Estimated Variable Cost (per unit sold) 2 Production costs: 3 Direct materials — $66.00 4 Direct labor — 32.00 5 Factory overhead $190,000.00 20.00 6 Selling expenses: 7 Sales salaries and commissions 102,000.00 6.00 8 Advertising 37,000.00 — 9 Travel 10,000.00 — 10 Miscellaneous selling expense 7,800.00 1.00 11 Administrative expenses: 12 Office and officers’ salaries 138,400.00 — 13 Supplies 12,000.00 2.00 14 Miscellaneous administrative expense 14,000.00 1.00 15 Total $511,200.00 $128.00 It is expected that 21,300 units will be sold at a price of $160 a unit. Maximum sales within the relevant range are 25,900 units. Required: 1. Prepare an estimated income statement for 20Y3. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Enter all amounts as positive values. 2. What is the expected contribution margin ratio? 3. Determine the break-even sales in units and dollars. Round your answers to the nearest whole number. 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? Round your answers to the nearest whole number. 6. 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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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:

1		Estimated Fixed Cost	Estimated Variable Cost (per unit sold)
2	Production costs:
3	Direct materials	—	$66.00
4	Direct labor	—	32.00
5	Factory overhead	$190,000.00	20.00
6	Selling expenses:
7	Sales salaries and commissions	102,000.00	6.00
8	Advertising	37,000.00	—
9	Travel	10,000.00	—
10	Miscellaneous selling expense	7,800.00	1.00
11	Administrative expenses:
12	Office and officers’ salaries	138,400.00	—
13	Supplies	12,000.00	2.00
14	Miscellaneous administrative expense	14,000.00	1.00
15	Total	$511,200.00	$128.00

It is expected that 21,300 units will be sold at a price of $160 a unit. Maximum sales within the relevant range are 25,900 units.

	Required:
1.	Prepare an estimated income statement for 20Y3. Refer to the Labels and Amount Descriptions list provided for the exact wording of the answer choices for text entries. Enter all amounts as positive values.
2.	What is the expected contribution margin ratio?
3.	Determine the break-even sales in units and dollars. Round your answers to the nearest whole number.
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? Round your answers to the nearest whole number.
6.	Determine the operating leverage. Round to one decimal place.

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