Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage Belmain Co. expects to maintain the same inventories at the end of 20Y7 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 — $28 Direct labor — 19 Factory overhead $495,200 14 Selling expenses: Sales salaries and commissions 102,900 6 Advertising 34,800 — Travel 7,700 — Miscellaneous selling expense 8,500 6 Administrative expenses: Office and officers' salaries 100,600 — Supplies 12,400 2 Miscellaneous administrative expense 11,660 3 Total $773,760 $78 It is expected that 5,580 units will be sold at a price of $390 a unit. Maximum sales within the relevant range are 7,000 units. Required: 1. Prepare an estimated income statement for 20Y7. Belmain Co. Estimated Income Statement For the Year Ended December 31, 20Y7 $fill in the blank 27010402300004b_2 Cost of goods sold: $fill in the blank 27010402300004b_4 fill in the blank 27010402300004b_6 fill in the blank 27010402300004b_8 Total cost of goods sold fill in the blank 27010402300004b_9 Gross profit $fill in the blank 27010402300004b_10 Expenses: Selling expenses: $fill in the blank 27010402300004b_12 fill in the blank 27010402300004b_14 fill in the blank 27010402300004b_16 fill in the blank 27010402300004b_18 Total selling expenses $fill in the blank 27010402300004b_19 Administrative expenses: $fill in the blank 27010402300004b_21 fill in the blank 27010402300004b_23 fill in the blank 27010402300004b_25 Total administrative expenses fill in the blank 27010402300004b_26 Total expenses fill in the blank 27010402300004b_27 Operating income $fill in the blank 27010402300004b_28 2. What is the expected contribution margin ratio? Round to the nearest whole percent. fill in the blank 218063043fd1001_1 % 3. Determine the break-even sales in units and dollars. Units fill in the blank 218063043fd1001_2 units Dollars $fill in the blank 218063043fd1001_3 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? $ fill in the blank 218063043fd1001_4 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars: $fill in the blank 218063043fd1001_5 Percentage: (Round to the nearest whole percent.) fill in the blank 218063043fd1001_6 % 6. Determine the operating leverage. Round to one decimal place. fill in the blank 218063043fd1001_7

Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage Belmain Co. expects to maintain the same inventories at the end of 20Y7 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 — $28 Direct labor — 19 Factory overhead $495,200 14 Selling expenses: Sales salaries and commissions 102,900 6 Advertising 34,800 — Travel 7,700 — Miscellaneous selling expense 8,500 6 Administrative expenses: Office and officers' salaries 100,600 — Supplies 12,400 2 Miscellaneous administrative expense 11,660 3 Total $773,760 $78 It is expected that 5,580 units will be sold at a price of $390 a unit. Maximum sales within the relevant range are 7,000 units. Required: 1. Prepare an estimated income statement for 20Y7. Belmain Co. Estimated Income Statement For the Year Ended December 31, 20Y7 $fill in the blank 27010402300004b_2 Cost of goods sold: $fill in the blank 27010402300004b_4 fill in the blank 27010402300004b_6 fill in the blank 27010402300004b_8 Total cost of goods sold fill in the blank 27010402300004b_9 Gross profit $fill in the blank 27010402300004b_10 Expenses: Selling expenses: $fill in the blank 27010402300004b_12 fill in the blank 27010402300004b_14 fill in the blank 27010402300004b_16 fill in the blank 27010402300004b_18 Total selling expenses $fill in the blank 27010402300004b_19 Administrative expenses: $fill in the blank 27010402300004b_21 fill in the blank 27010402300004b_23 fill in the blank 27010402300004b_25 Total administrative expenses fill in the blank 27010402300004b_26 Total expenses fill in the blank 27010402300004b_27 Operating income $fill in the blank 27010402300004b_28 2. What is the expected contribution margin ratio? Round to the nearest whole percent. fill in the blank 218063043fd1001_1 % 3. Determine the break-even sales in units and dollars. Units fill in the blank 218063043fd1001_2 units Dollars $fill in the blank 218063043fd1001_3 4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales? $ fill in the blank 218063043fd1001_4 5. What is the expected margin of safety in dollars and as a percentage of sales? Dollars: $fill in the blank 218063043fd1001_5 Percentage: (Round to the nearest whole percent.) fill in the blank 218063043fd1001_6 % 6. Determine the operating leverage. Round to one decimal place. fill in the blank 218063043fd1001_7

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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Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage

Belmain Co. expects to maintain the same inventories at the end of 20Y7 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	—		$28
	Direct labor	—		19
	Factory overhead	$495,200			14
Selling expenses:
	Sales salaries and commissions	102,900			6
	Advertising	34,800			—
	Travel	7,700			—
	Miscellaneous selling expense	8,500			6
Administrative expenses:
	Office and officers' salaries	100,600			—
	Supplies	12,400			2
	Miscellaneous administrative expense	11,660			3
	Total	$773,760			$78

It is expected that 5,580 units will be sold at a price of $390 a unit. Maximum sales within the relevant range are 7,000 units.

Required:

1. Prepare an estimated income statement for 20Y7.

Belmain Co.
Estimated Income Statement
For the Year Ended December 31, 20Y7
			$fill in the blank 27010402300004b_2
Cost of goods sold:
		$fill in the blank 27010402300004b_4
		fill in the blank 27010402300004b_6
		fill in the blank 27010402300004b_8
Total cost of goods sold			fill in the blank 27010402300004b_9
Gross profit			$fill in the blank 27010402300004b_10
Expenses:
Selling expenses:
	$fill in the blank 27010402300004b_12
	fill in the blank 27010402300004b_14
	fill in the blank 27010402300004b_16
	fill in the blank 27010402300004b_18
Total selling expenses		$fill in the blank 27010402300004b_19
Administrative expenses:
	$fill in the blank 27010402300004b_21
	fill in the blank 27010402300004b_23
	fill in the blank 27010402300004b_25
Total administrative expenses		fill in the blank 27010402300004b_26
Total expenses			fill in the blank 27010402300004b_27
Operating income			$fill in the blank 27010402300004b_28

2. What is the expected contribution margin ratio? Round to the nearest whole percent.
fill in the blank 218063043fd1001_1 %

3. Determine the break-even sales in units and dollars.

Units	fill in the blank 218063043fd1001_2 units
Dollars	$fill in the blank 218063043fd1001_3

4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?
$ fill in the blank 218063043fd1001_4

5. What is the expected margin of safety in dollars and as a percentage of sales?

Dollars:	$fill in the blank 218063043fd1001_5
Percentage: (Round to the nearest whole percent.)	fill in the blank 218063043fd1001_6	%

6. Determine the operating leverage. Round to one decimal place.
fill in the blank 218063043fd1001_7

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