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     $17       Direct labor     12       Factory overhead $909,300     9     Selling expenses:             Sales salaries and commissions 189,000     4       Advertising 63,900             Travel 14,200             Miscellaneous selling expense 15,600     3     Administrative expenses:             Office and officers' salaries 184,700             Supplies 22,700     1       Miscellaneous administrative expense 21,400     2       Total $1,420,800     $48     It is expected that 11,100 units will be sold at a price of $240 a unit. Maximum sales within the relevant range are 14,000 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 b7fbb700a047fd6_2 Cost of goods sold:           $fill in the blank b7fbb700a047fd6_4       fill in the blank b7fbb700a047fd6_6       fill in the blank b7fbb700a047fd6_8   Cost of goods sold     fill in the blank b7fbb700a047fd6_9 Gross profit     $fill in the blank b7fbb700a047fd6_10 Expenses:       Selling expenses:         $fill in the blank b7fbb700a047fd6_12       fill in the blank b7fbb700a047fd6_14       fill in the blank b7fbb700a047fd6_16       fill in the blank b7fbb700a047fd6_18     Total selling expenses   $fill in the blank b7fbb700a047fd6_19   Administrative expenses:         $fill in the blank b7fbb700a047fd6_21       fill in the blank b7fbb700a047fd6_23       fill in the blank b7fbb700a047fd6_25     Total administrative expenses   fill in the blank b7fbb700a047fd6_26   Total expenses     fill in the blank b7fbb700a047fd6_27 Income from operations     $fill in the blank b7fbb700a047fd6_28 2.  What is the expected contribution margin ratio? Round to the nearest whole percent. fill in the blank 1ca70afe8ff7fdc_1 % 3.  Determine the break-even sales in units and dollars. Units fill in the blank 1ca70afe8ff7fdc_2 units Dollars fill in the blank 1ca70afe8ff7fdc_3 units

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
icon
Related questions
Topic Video
Question

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     $17    
  Direct labor     12    
  Factory overhead $909,300     9    
Selling expenses:          
  Sales salaries and commissions 189,000     4    
  Advertising 63,900          
  Travel 14,200          
  Miscellaneous selling expense 15,600     3    
Administrative expenses:          
  Office and officers' salaries 184,700          
  Supplies 22,700     1    
  Miscellaneous administrative expense 21,400     2    
  Total $1,420,800     $48    

It is expected that 11,100 units will be sold at a price of $240 a unit. Maximum sales within the relevant range are 14,000 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 b7fbb700a047fd6_2
Cost of goods sold:      
    $fill in the blank b7fbb700a047fd6_4  
    fill in the blank b7fbb700a047fd6_6  
    fill in the blank b7fbb700a047fd6_8  
Cost of goods sold     fill in the blank b7fbb700a047fd6_9
Gross profit     $fill in the blank b7fbb700a047fd6_10
Expenses:      
Selling expenses:      
  $fill in the blank b7fbb700a047fd6_12    
  fill in the blank b7fbb700a047fd6_14    
  fill in the blank b7fbb700a047fd6_16    
  fill in the blank b7fbb700a047fd6_18    
Total selling expenses   $fill in the blank b7fbb700a047fd6_19  
Administrative expenses:      
  $fill in the blank b7fbb700a047fd6_21    
  fill in the blank b7fbb700a047fd6_23    
  fill in the blank b7fbb700a047fd6_25    
Total administrative expenses   fill in the blank b7fbb700a047fd6_26  
Total expenses     fill in the blank b7fbb700a047fd6_27
Income from operations     $fill in the blank b7fbb700a047fd6_28

2.  What is the expected contribution margin ratio? Round to the nearest whole percent.
fill in the blank 1ca70afe8ff7fdc_1 %

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

Units fill in the blank 1ca70afe8ff7fdc_2 units
Dollars fill in the blank 1ca70afe8ff7fdc_3 units

4.  Construct a cost-volume-profit chart on your own paper. What is the break-even sales?
$ fill in the blank 1ca70afe8ff7fdc_4

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

Dollars: $fill in the blank 1ca70afe8ff7fdc_5  
Percentage: (Round to the nearest whole percent.) fill in the blank 1ca70afe8ff7fdc_6 %

6.  Determine the operating leverage. Round to one decimal place.
fill in the blank 1ca70afe8ff7fdc_7

Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 4 steps with 5 images

Blurred answer
Knowledge Booster
Performance measurements
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education