Reference no: EM13586962

Soldner Health Care Products Inc. expects to maintain the same inventories at the end of 2014 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 2014. A summary report of these estimates is as follows:

		Estimated Fixed Cost			Estimated Variable Cost (per unit sold)
Production costs:
	Direct materials				$28
	Direct labor				19
	Factory overhead	$910,500			14
Selling expenses:
	Sales salaries and commissions	189,200			6
	Advertising	64,000
	Travel	14,200
	Miscellaneous selling expense	15,600			6
Administrative expenses:
	Office and officers' salaries	185,000
	Supplies	22,800			2
	Miscellaneous administrative expense	21,420			3
	Total	$1,422,720			$78

It is expected that 8,360 units will be sold at a price of $390 a unit. Maximum sales within the relevant range are 10,000 units.

Required:

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1. Prepare an estimated income statement for 2014.

2.What is the expected contribution margin ratio? Round to the nearest whole percent.

%

3. Determine the break-even sales in units.
units

4. Construct a cost-volume-profit chart on your own paper. What is the break-even sales?
$

5. What is the expected margin of safety in dollars and as a percentage of sales?

Dollars:	$
Percentage: (Round to the nearest whole percent.)		%

6. Determine the operating leverage. Round to one decimal place.