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P11-6 Contribution margin, break-even sales, cost-volume-profit graph, and operating leverage Organic Health Care Products Inc. expects to maintain the same inventories at the end of 20Y8 as at the beginning of the year. The total of all production costs for the year is there- fore assumed to be equal to the cost of goods sold. With this in mind, the various depart- ment heads were asked to submit estimates of the costs for their departments during 20Y8. A summary report of these estimates is as follows: EstimatedEstimated Variable Cost Fixed Cost (per unit sold) Production costs: Direct materials Direct labor Factory overhead 8.00 3.00 1.50 200,000 Selling expenses: Advertising Sales salaries and commissions Travel Miscellaneous selling expense 1,450,000 93,000 340,000 2,000 1.85 0.10 Administrative expenses: Office and officers' salaries Supplies Miscellaneous administrative expense Total 300,000 10,000 5,000 0.50 0.05 $15.00 It is expected that 400,000 units will be sold at a price of $25 a unit. Maximum sales within the relevant range are 500 ,000 units. Instructions repare an estimated income statement for 20Y8. at is the expected contribution margin ratio? 2. Determine the break-even sales in units. nstruct a cost-volume-profit graph indicating the break-even sales. Determine the operating leverage

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