Prepare an estimated income statement for 20Y3.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage

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:

  Estimated
Fixed Cost
  Estimated Variable Cost
(per unit sold)
Production costs:          
  Direct materials   $46    
  Direct labor   40    
  Factory overhead $200,000     20    
Selling expenses:          
  Sales salaries and commissions 110,000     8    
  Advertising 40,000        
  Travel 12,000        
  Miscellaneous selling expense 7,600     1    
Administrative expenses:          
  Office and officers' salaries 132,000        
  Supplies 10,000     4    
  Miscellaneous administrative expense 13,400     1    
Total   $525,000     $120    

 

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:

1.   Prepare an estimated income statement for 20Y3.

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