tor Print Item t Chart, Margin of Safety, and Operating Leverage be man ca e ect
ID: 2523050 • Letter: T
Question
tor Print Item t Chart, Margin of Safety, and Operating Leverage be man ca e ects to maintain the same inventories at the end of 20y, as at the beginning o the year. The total o 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 Estimated Variable Cost (per unit sold) Fixed Cost Direct materials Direct labor Factory overhead $28 $700,900 14 Selling expenses: 145,700 Advertising 11,000 selling expense 12,000 142,400 17,500 16,320 $1,095,120 $78 It is expected that 8,580 units wll be sold at a price of $312 a unit. Maximum sales within the relevant range are 11,000 units. Required Previous NextExplanation / Answer
1) Income Statement
2) Contribution margin ratio = (selling price per unit - variable expenses per unit) / selling price per unit
Contribution margin ratio = 234 / 312
= 75%
3) Break even sales in units = fixed costs / contribution margin per unit
Break even units = 1095120 / 234
= 4680 units
Break even sales in dollars = 4680 * 312
= $14,60,160
5) Margin of safety = actual sales - break even sales
= 2676960 - 1460160
= $12,16,800
Margin of safety in % = 1216800 / 2676960
= 45.45%
6) Operating leverage = Total contribution margin / (Total contribution margin - fixed costs)
= 2007720 / (2007720 - 1095120)
= 2.2
Belmain Co. Estimated Income Statement For the year ended December 31, 2017 Sales $26,76,960 Cost of goods sold: Direct materials $2,40,240 Direct labor $1,63,020 Factory overhead $8,21,020 Total cost of goods sold $12,24,280 Gross profit $14,52,680 Expenses: Selling expenses: sales salaries and commission $1,97,180 Advertising $49,300 Travel $11,000 Misc selling expenses $63,480 Total selling expenses $3,20,960 Administration expenses: Office and Officers salaries $1,42,400 Supplies $34,660 Misc. administrative expesnes $42,060 Total Administration expenses $2,19,120 Total expenses $5,40,080 Income from operations $9,12,600Related Questions
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