Question

2. Based on the break-even sales (units) in part (1), determine the unit sales of both the 70% The estimated fixed costs for the current year are $46,800. Instructions 1. Determine the estimated units of sales of the overall (total) product, E, necessary to reach the break-even point for the current year. 3. 12" pizza and 16" pizza for the current year. Assume that the sales mix was 50% 12" pizza and 50% 16" pizza. Compare the break-even point with that in part (1). Why is it so different? PR 21-6B Contribution margin, break-even sales, cost-volume-profit chart, OBJ. 2, 3, 4, 5 margin of safety, and operating leverage Belmain Co. expects to maintain the same inventories at the end of 2017 as at the begin- ning 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) $50.00 30.00 6.00 $ 350,000 4.00 Production costs: Direct materials Direct labor Factory overhead Selling expenses: Sales salaries and commissions. Advertising Travel Miscellaneous selling expense Administrative expenses: Office and officers' salaries Supplies...... Miscellaneous administrative expense. 340,000 116,000 4,000 2,300 1.00 325,000 6,000 8,700 $1,152,000 4.00 1.00 $96.00 Total (Continued)
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Answer 1

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$2,880,000 $1,382,000 $1,498,000 BELMAIN CO. Estimated Income Statement For the Year Ended December 31, 2017 Sales Cost of goods sold: Direct materials $600,000 Direct labor $360,000 Factory overhead $422,000 Total Cost of goods sold Gross profit Less: Expenses Selling expenses: Sales salaries and commission $388,000 Advertising $116,000 Travel $4,000 Miscellaneous selling expense $14,300 Total selling expenses $522,300 Administrative expenses: Office and Office salaries $325,000 Supplies $54,000 Miscellaneous administrative expense $20,700 Total Administrative expenses $399,700 Total expenses Income from Operations $922,000 $576,000 2 Contribution margin ratio 60.00% Selling price Variable cost Contribution margin Contribution margin % Contribution/Selling price % $2401 $96) $144 60% 3 Break even point in units 8,000 Units Break even point in units Fixed Cost Contribution per unit $1,152,000 8,000 $144 $960,000 A-B 5 Margin of Safety (Total sales - Break even sales) Margin of safety as % of sales 33% Total Sales Break even sales $2,880,000 $1,920,000 B 3.0 a/b 6 Operating Leverage (Contribution/Operating profit) Contribution Operating profit $1,728,000 a $576,000 b 4 Break even sales $1,920,000 $4,000,000 $ 3,500,000 $ 3,000,000 $ 2,500,000 Break even sales Variable cost Fixed cost $ 2,000,000 *Total cost $1,500,000 *Revenue $1,000,000 $ 500,000 $0 0 3,000 6,000 9,000 12,000 15,000

B E K M N 11 12 13 FC VC 14 15 50 16 30 17 350000 6 18 19 20 21 G H Estimated Income Statement For the Year Ended December 31, 2017 Sales =J6*240 Cost of goods sold: Direct materials = $6*M15 Direct labor = $6*M16 Factory overhead = $6*M17+L17 Total Cost of goods sold =SUM(G15:617) Gross profit =H13-H18 Less: Expenses Selling expenses: Sales salaries and commission =(36*M22)+L22 Advertising =(J6*M23)+L23 Travel =(36*M24)+L24 Miscellaneous selling expense =(J6*M25) +L25 Total selling expenses =SUM(F22:F25 Administrative expenses: Office and Office salaries =(J6*M28)+L28 Supplies =(J6*M29)+L29 Miscellaneous administrative expense =(J6*M30)+L30 Total Administrative expenses =SUM(F28:F30 Total expenses =SUM(G26:G31) Income from Operations =H19-H32 340000 4 22 23 24 25 26 27 116000 4000 2300 1 325000 6000 4 28 29 30 31 8700 1 =SUM(L15:L3 =SUM(M14:N =H32+H18 32 33 34

А B E F G H 2 Contribution margin ratio =F41 Selling price Variable cost Contribution margin Contribution margin % Contribution/Selling price % =H13/16 =M31 =F38-F39 =F40/F38 3 =E48 =G49 Units 36 37 38 39 40 41 42 43 44 46 47 48 49 50 51 57 58 59 60 61 62 63 64 65 66 67 68 69 Break even point in units Fixed Cost Contribution per unit =L31 =F40 =F49/F50 =F64-F65 A-B 5 Margin of Safety (Total sales - Break even sales) Margin of safety as % of sales =F59/F64 A Total Sales Break even sales =H13 =G54 B =F71/F72 a/b 6 Operating Leverage (Contribution/Operating profit)