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Q1) Aspen Co. expects to sustain same inventories at the end of 2008 as at the starting of year. Total of all production costs for year is hence suppose to be equal to cost of goods sold. With this in mind, various department heads were asked to submit evaluates of costs for their departments during 2008. Summary report of these evaluates is as follows:


It is expected that 19,000 units will be sold at price of $350 a unit. Maximum sales within relevant range are 30,000 units.


  Estimated Fixed Cost Estimated Variable Cost (per unit sold)
Production costs:    
Direct materials............ - $8.90
Direct labor................ - 3.80
Factory overhead............ $80,200 2.10
Selling expenses:    
Sales salaries and commissions........ 41,200 1.70
Advertising................. 13,200 -
Travel................. 2,700 -
Miscellaneous selling expense...... 5,400 1.50
Administrative expenses:    
Office and officers' salaries...... 81,500 -
Supplies.................... 4,700 0.70
Miscellaneous administrative expense...... 10,500 2.30
Total....................... $239,400 $21.00



1. Create estimated income statement for 2008.

2. Determine the expected contribution margin ratio?

3. Find out the break-even sales in units.

4. Create a cost-volume-profit chart indicating the break-even sales.

5. Compute expected margin of safety?

6. Find out the operating leverage.

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  • Reference No.:- M919725

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