Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safet

Question

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

Soldner Health Care Products Inc. expects to maintain the same inventories at the end of 2012 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 2012. A summary report of these estimates is as follows:
Estimated Fixed Cost       Estimated Variable Cost
(per unit sold)
Production costs:
Direct materials $30
Direct labor 20
Factory overhead $1,462,300 15
Selling expenses:
Sales salaries and commissions 303,900 7
Advertising 102,800
Travel 22,800
Miscellaneous selling expense 25,100 6
Administrative expenses:
Office and officers' salaries 297,000
Supplies 36,600 3
Miscellaneous administrative expense 34,300 3
Total $2,284,800 $84

It is expected that 10,200 units will be sold at a price of $420 a unit. Maximum sales within the relevant range are 13,000 units.



1. Prepare an estimated income statement for 2012.


Soldner Health Care Products Inc.
Estimated Income Statement
For the Year Ended December 31, 2012

$
Cost of goods sold:


$





Cost of goods sold

Gross profit

$
Expenses:

Selling expenses:


$







Total selling expenses

$

Administrative expenses:


$





Total administrative expenses


Total expenses

Income from operations

$




1. Use the absorption costing format.

2. What is the expected contribution margin ratio? Round to the nearest whole percent.
80 %


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

Please show me how you got your numbers please!!!! Thanks

Explanation / Answer

2. expected contribution margin ratio

contribution=4284000-703800=3580200

contribution margin ratio=3580200/4284000=83.57%

BREAK EVEN SALES IN UNITS= 2284800/351=6509

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.