Question

OBJ. 2,3,4,5 ✓ 2. 62.5% Search PR 21-6A Contribution margin, break-even sales, cost-volume-profit chart, margin of safety, and operating leverage Blythe Industries Inc, expects to maintain the same inventories at the end of 2012 as at the beginning of the year. The total of all production costs for the year is therefore as sumed 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 2012. A summary report of these estimates is as follows: Estimated Fixed Cost Estimated Variable Cost (per unit sold) $30 $340,000 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........ Total ............... . 80,000 32,000 8,000 7,600 120,000 8,000 4,400 $600,000 It is expected that 8,000 units will be sold at a price of $200 a unit. Maximum sales within the relevant range are 9,000 units. Instructions 1. Prepare an estimated income statement for 2012. 2. What is the expected contribution margin ratio? 3. Determine the break-even sales in units and dollars. 4. Construct a cost-volume-profit chart indicating the break-even sales. 5. What is the expected margin of safety in dollars and as a percentage of sales? 6. Determine the operating leverage.
I need help with number 4 only please

Answer 1

Cost-Volume-Profit Chart $ 2,000,000 $ 1,800,000 $1,600,000 $ 1,400,000 units 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 sales $ $0 $200,000 $ 400,000 $ 600,000 $ 800,000 $1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000 costs $ $ 600,000 $ 675,000 $750,000 $ 825,000 $ 900,000 $ 975,000 $1,050,000 $ 1,125,000 $1,200,000 $1,275,000 $ 1,200,000 $ 1,000,000 $ 800,000 $ 600,000 $ 400,000 $ 200,000 $0 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000 - sales 5 costs $

In the above chart,

the red arrow is the operating loss area

the black arrow is the break even point

the blue arrow is the operating profit area

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