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 $98,800 14 Selling expenses: Sales salaries and commissions 20,500 6 Advertising 6,900 — Travel 1,500 — Miscellaneous selling expense 1,700 6 Administrative expenses: Office and officers' salaries 20,100 — Supplies 2,500 2 Miscellaneous administrative expense 2,440 3 Total $154,440 $78 It is expected that 5,280 units will be sold at a price of $156 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 160b410e1f8a05a_2 Cost of goods sold: $fill in the blank 160b410e1f8a05a_4 fill in the blank 160b410e1f8a05a_6 fill in the blank 160b410e1f8a05a_8 Total cost of goods sold fill in the blank 160b410e1f8a05a_9 Gross profit $fill in the blank 160b410e1f8a05a_10 Expenses: Selling expenses: $fill in the blank 160b410e1f8a05a_12 fill in the blank 160b410e1f8a05a_14 fill in the blank 160b410e1f8a05a_16 fill in the blank 160b410e1f8a05a_18 Total selling expenses $fill in the blank 160b410e1f8a05a_19 Administrative expenses: $fill in the blank 160b410e1f8a05a_21 fill in the blank 160b410e1f8a05a_23 fill in the blank 160b410e1f8a05a_25 Total administrative expenses fill in the blank 160b410e1f8a05a_26 Total expenses fill in the blank 160b410e1f8a05a_27 Operating income $fill in the blank 160b410e1f8a05a_28 2. What is the expected contribution margin ratio? Round to the nearest whole percent. fill in the blank 35d75bfacfeb023_1 % 3. Determine the break-even sales in units and dollars.

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 $98,800 14 Selling expenses: Sales salaries and commissions 20,500 6 Advertising 6,900 — Travel 1,500 — Miscellaneous selling expense 1,700 6 Administrative expenses: Office and officers' salaries 20,100 — Supplies 2,500 2 Miscellaneous administrative expense 2,440 3 Total $154,440 $78 It is expected that 5,280 units will be sold at a price of $156 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 160b410e1f8a05a_2 Cost of goods sold: $fill in the blank 160b410e1f8a05a_4 fill in the blank 160b410e1f8a05a_6 fill in the blank 160b410e1f8a05a_8 Total cost of goods sold fill in the blank 160b410e1f8a05a_9 Gross profit $fill in the blank 160b410e1f8a05a_10 Expenses: Selling expenses: $fill in the blank 160b410e1f8a05a_12 fill in the blank 160b410e1f8a05a_14 fill in the blank 160b410e1f8a05a_16 fill in the blank 160b410e1f8a05a_18 Total selling expenses $fill in the blank 160b410e1f8a05a_19 Administrative expenses: $fill in the blank 160b410e1f8a05a_21 fill in the blank 160b410e1f8a05a_23 fill in the blank 160b410e1f8a05a_25 Total administrative expenses fill in the blank 160b410e1f8a05a_26 Total expenses fill in the blank 160b410e1f8a05a_27 Operating income $fill in the blank 160b410e1f8a05a_28 2. What is the expected contribution margin ratio? Round to the nearest whole percent. fill in the blank 35d75bfacfeb023_1 % 3. Determine the break-even sales in units and dollars.

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	$98,800			14
Selling expenses:
	Sales salaries and commissions	20,500			6
	Advertising	6,900			—
	Travel	1,500			—
	Miscellaneous selling expense	1,700			6
Administrative expenses:
	Office and officers' salaries	20,100			—
	Supplies	2,500			2
	Miscellaneous administrative expense	2,440			3
	Total	$154,440			$78

It is expected that 5,280 units will be sold at a price of $156 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 160b410e1f8a05a_2
Cost of goods sold:
		$fill in the blank 160b410e1f8a05a_4
		fill in the blank 160b410e1f8a05a_6
		fill in the blank 160b410e1f8a05a_8
Total cost of goods sold			fill in the blank 160b410e1f8a05a_9
Gross profit			$fill in the blank 160b410e1f8a05a_10
Expenses:
Selling expenses:
	$fill in the blank 160b410e1f8a05a_12
	fill in the blank 160b410e1f8a05a_14
	fill in the blank 160b410e1f8a05a_16
	fill in the blank 160b410e1f8a05a_18
Total selling expenses		$fill in the blank 160b410e1f8a05a_19
Administrative expenses:
	$fill in the blank 160b410e1f8a05a_21
	fill in the blank 160b410e1f8a05a_23
	fill in the blank 160b410e1f8a05a_25
Total administrative expenses		fill in the blank 160b410e1f8a05a_26
Total expenses			fill in the blank 160b410e1f8a05a_27
Operating income			$fill in the blank 160b410e1f8a05a_28

2. What is the expected contribution margin ratio? Round to the nearest whole percent.
fill in the blank 35d75bfacfeb023_1 %

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

Units	fill in the blank 35d75bfacfeb023_2 units
Dollars	$fill in the blank 35d75bfacfeb023_3

4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?
$ fill in the blank 35d75bfacfeb023_4

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

Dollars:	$fill in the blank 35d75bfacfeb023_5
Percentage: (Round to the nearest whole percent.)	fill in the blank 35d75bfacfeb023_6	%

6. Determine the operating leverage. Round to one decimal place.
fill in the blank 35d75bfacfeb023_7

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