PR A Contribution margin, breakeven sales, costvolumeprofit chart, margin of safety, and operating leverage
Blythe Industries Inc. expects to maintain the same inventories at the end of 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 A summary report of these estimates is as follows:
tabletableEstimatedFixed CosttableEstimated Variable Costper unit sold
It is expected that units will be sold at a price of $ a unit. Maximum sales within the relevant range are units.
Instructions
Prepare an estimated income statement for
What is the expected contribution margin ratio?
Determine the breakeven sales in units and dollars.
Construct a costvolumeprofit chart indicating the breakeven sales.
What is the expected margin of safety in dollars and as a percentage of sales?
Determine the operating leverage.
