The contribution margin income statement of Krazy Kustard Donuts for March 2008 follows:

Krazy: Kustard sells 2 dozen plain donuts for every dozen custard-filled donuts. A dozen plain donuts sells for \(S 6\), with a variable cost of \(S 2\) per dozen. A dozen custard-filled donuts sells for \(5^{5}\), with a variable cost of \(\$ 4.20\) per dozen.

Requirements 

1. Determine Krazy Kustard's monthly breakeven point in dozens of plain donuts and custard-filled donuts. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of costs: variable and fixed.

2. Compute Krazy Kustard's margin of safety in dollars for March 2008.

3. If Krazy Kustard can increase monthly sales volume by \(10 \%\), what will operating income be? The sales mix remains unchanged.

Transcribed Image Text:

KRAZY KUSTARD DONUTS Contribution Margin Income Statement For the Month of March 2008 Sales revenue $128.000 Variable costs: Costs of goods sold $32,560 Marketing costs 17,280 General and administrative cost 5.402 55.242 Contribution margin 72,758 Fixed costs: Marketing cost 38,880 General and administrative cost 4.320 43.200 Operating income $ 29.558