Question

ontribution 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$626,700  9  Selling expenses:      Sales salaries and commissions130,200  4   Advertising44,100      Travel9,800      Miscellaneous selling expense10,800  3  Administrative expenses:      Office and officers' salaries127,300      Supplies15,700  1   Miscellaneous administrative expense14,600  2   Total$979,200  $48  
It is expected that 10,200 units will be sold at a price of $192 a unit. Maximum sales within the relevant range are 13,000 units.
Required:

1.   Prepare an estimated income statement for 20Y7.

Belmain Co.Estimated Income StatementFor the Year Ended December 31, 20Y7 $Cost of goods sold: $  Cost of goods soldGross profit$Expenses:Selling expenses: $   Total selling expenses$Administrative expenses: $  Total administrative expensesTotal expensesIncome from operations$

2.  What is the expected contribution margin ratio? Round to the nearest whole percent.
 %
3.  Determine the break-even sales in units and dollars.
Units unitsDollars units
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?
Dollars:$ Percentage: (Round to the nearest whole percent.)%
6.  Determine the operating leverage. Round to one decimal place.

Answer 1

As per our policy, we cannot able to post solution more than four sub parts of question.

Answer 1
Belmain Co.
Estimated Income Statement
For the Year Ended December 31, 20Y7
Sales revenue (10200*192)		1,958,400
Less: Cost of goods sold (17+12+9 = 38) (38*10200=387600) (387600+626700=1014300)		1,014,300
Gross profit		944,100
Expenses:
Selling expenses
Sales salaries and commissions (130200 + (4*10200))	171,000
Advertising	44,100
Travel	9,800
Miscellaneous selling expense (10800 + (3*10200))	41,400
Total selling expenses		266,300
Administrative expenses
Office and officers' salaries	127,300
Supplies (15700 + (1*10200))	25,900
Miscellaneous administrative expense (14600 + (2*10200))	35,000
Total administrative expenses		188,200
Total expenses		454,500
Income from operations		489,600

Answer 2
Belmain Co.
Contribution margin Income Statement
For the Year Ended December 31, 20Y7
Sales revenue (10200*192)	1,958,400
Less: variable cost (48*10200)	489,600
Contribution margin	1,468,800
Less: Fixed cost	979,200
Income from operations	489,600
Contribution margin	1,468,800
Divided by: Sales revenue	1,958,400
Contribution margin ratio	75%
Answer 3
Fixed cost	979,200
Divided by: Contribution margin ratio	75%
Break-even sales in dollars	1,305,600
Fixed cost	979,200
Divided by: Contribution margin per unit (192-48)	144
Break-even sales in units	6,800
Answer 4
Sales in Dollars	1,958,400
Less: break-even sales in dollars	1,305,600
Expected margin of safety in dollars	652,800
Expected margin of safety in % of sales (expected margin of safety in dollars / Sales in Dollars)	33.33%