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Homework Chapter zu Contribution Margin, Break-Even Sales, Cost-Volume-Profit Chart, Margin of Safety, and Operating Leverage
1. Prepare an estimated income statement for 2017. Belmain Co. Estimated Income Statement For the Year Ended December 31, 201
Total selling expenses Administrative expenses: Total administrative expenses Total expenses Operating income 2. What is the
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Answer #1

1,243,200 222,000 148,000 309,900 679,900 563,300 Answer to Requirement 1. Belmain Co. Estimated Income Statement For the Yea

Answer to Requirement 2.

Unit Selling Price = $168
Unit Variable Cost = $84
Unit Contribution Margin = Unit Selling Price - Unit Variable Cost
Unit Contribution Margin = $168 - $84
Unit Contribution Margin = $84

Contribution Margin Ratio = Unit Contribution Margin / Unit Selling Price * 100
Contribution Margin Ratio = $84 / $168 * 100
Contribution Margin Ratio = 50%

Answer to Requirement 3.

Break Even Sales (Units) = Fixed Cost / Unit Contribution Margin
Break Even Sales (Units) = $310,800 / $84
Break Even Sales (Units) = 3,700 Units

Break Even Sales (Dollars) = Break Even Sales (Units) * Unit Selling Price
Break Even Sales (Dollars) = 3,700 * $168
Break Even Sales (Dollars) = $621,600

Answer to Requirement 5.

Margin of Safety (Dollars) = Current Sales – Break Even Dollar Sales
Margin of Safety (Dollars) = $1,243,200 - $621,600
Margin of Safety (Dollars) = $621,600

Margin of Safety (Percent) = (Current Sales – Break Even Dollar Sales) / Current Sales * 100
Margin of Safety (Percent) = ($1,243,200 - $621,600) / $621,600 * 100
Margin of Safety (Percent) = 100%

Answer to Requirement 6.

Contribution Margin = 7,400 * $84
Contribution Margin = $621,600

Operating Leverage = Contribution Margin / EBIT
Operating Leverage = $621,600 / $310,800
Operating Leverage = 2.0

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