A B B 1 Extreme Coffee 3 $ 100,000 02 $ 2 Contribution Margin Income Statement 3 Month Ended May 31 4 Sales revenue 5 Less variable expenses 6 Cost of goods sold $ 42,500 7 Marketing expense 6,000 8 General and administrative expense 1,500 9 Contribution margin $ 10 Less fixed expenses 11 Marketing expense $ 20,000 General and administrative expense 5,000 8 50,000 50,000 12 25,000 25,000 13 Operating income $ The contribution margin income statement of Extreme Coffee for May follows Click the icon to view the contribution margin income statement Extrome Coffee sells three small cottoos for every large coffee A small coffee sells for $2.00, with a variable expense of s1 00 A large cotton sets for $4.00, with a variable expense of $200 Read the requirements Requirement 1. Determine the coffee shop's monthly breakeven point in the numbers of small coffoes and large coffees. Prove your answer by preparing a summary contribution margin income statement at the breakoven level of sales Show only two categories of expenses variable and fixed Begin by identifying the formula to compute the total breakeven point in units (Abbreviations used avg Averago, CM = Contribution margin Breakeven sales in units Now calculate the weighted average contribution margin por unit (Round the weighted average contribution margin per unit to the nearest cent) Small Large Total Loss Weighted average contribution margin per unit The breakeven points small cups and large cups of coffee Prepare a summary contribution margin income statement to prove your answer above (Complete all input fields. For amounts with a so balance make sure to enter "0" in the appropriate input fold) Small Large Total Loss Loss Operating income Requirement 2. Compute the coffee shop's margin of safety in dollars. Identity the formula to compute the margin of safety in dollars Margin of safety in dollars The margin of safety in dollars is Requirement 3. Use the coffee shop's operating leverage factor (using the May contribution margin income statement) to determine its new operating income if sales volume increases 12% Prove your results using the contribution margin income statement format. Assume that sales mix remains unchanged Identey the formula to compute the operating leverage factor Operating sverge factor (Round your answer to two decimal places) Extreme Colfo's operating leverage factoris If Extreme Coffee can increase sales revenue by 12%, keeping the sales mo the same, operating incomo will be Prepare a summary contribution margin income statement to prove your answer above (For amounts with a so balance, make sure to enter "o" in the appropriate input field) Extreme Coffee Effect on Operating Income of 12% Increase in Sales Volume Current level Percent increase Dollar increase Sales revenue 125 Less Variabie expenses 12% Contribution margin Change in fixed expenses Operating income before sales increase Operating income after sales increase
