Calculator Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Marg

Question

Calculator 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 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 subm 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 Direct labor Factory overhead $19 13 10 $485,200 Selling expenses: Sales salaries and commissions Advertising Travel Miscellaneous selling expense 100,800 34,100 7,600 8,300 Administrative expenses: Office and officers' salaries Supplies Miscellaneous administrative expense Total 98,600 12,100 11,460 $758,160 $54 It is expected that 8,580 units will be sold at a price of $216 a unit. Maximum sales within the relawant.os

Explanation / Answer

1 INCOME STATEMENT Sales $ 1,853,280.00 [8580*$216] Cost of goods sold: Direct Materials $ 163,020.00 [8580*$19] Direct Labor $ 111,540.00 [8580*$13] Factory Overhead $ 571,000.00 [8580*$10 + 485200] Cost of goods sold $      845,560.00 Gross profit $ 1,007,720.00 Selling expenses: Sales salaries and commissions $ 135,120.00 [8580*$4+100800] Advertising $    34,100.00 Travel $      7,600.00 Misc. Selling Expense $    42,620.00 [8580*$4+8300] Total selling expenses $      219,440.00 Administrative expenses: Office and officers' salaries $    98,600.00 Supplies $    29,260.00 [8580*2+12100] Misc. administrative expense $    28,620.00 [8580*2+11460] Total administrative expenses $      156,480.00 Income from operations $      631,800.00 2 Contribution Margin Ratio = Selling Price - Variable Cost/Selling Price *100 = ($216 - $54)/$216*100 75% Contribution P.U = SP -VC = 216-54 = $162 3 BreakEven Point in units = Fixed Deposit /Contribution Per unit = $758160/$162 = 4680 units Break Even Point in units = BEP Units * SP per unit = 4680 units*$216 $                                                   1,010,880.00 5 Expected Margin of Safety = Total Expected Sales - Breakeven Sales = 18,53,280-10,10,880 $                                                       842,400.00 6 Margin of safety as percentage of sales = Margin of Safety Sales/Total Expected Sales =842400/1853280 45.45% Operating Leverage = Contribution/EBIT = ($162*8580 units)/$631800                                                                        2.20

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