CVP Analysis

get the word out to potential customers of this change. CVP analysis at a multiproduct firm (Learning Objectives 4&5) The contribution margin income statement of Morgantown Coffee for October follows: P7-66A wn Coffee n Income Statement 2 Contribution Month Ended October 31 S 95,000 Sales revenue Les 5 s variable expense 33,500 12,000 2.000 47,500 7 Cost of goods sold Marketing expense General and administrative expense 10 Contribution margin 11 Less fixed expenses: 12 47,500 19,125 Marketing expense General and administrative expense 14 Operating income Morgantown Coffee sells three small coffees for every large coffee. A small coffee sells for $2.00, with a variable expense of $1.00. A large coffee sells for $4.00, with a variable expense of $2.00. Requirements 1. Determine the coffee shop's monthly breakeven point in the numbers of small coffees and large coffees. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of expenses: variable and fixed. 2. Compute the coffee shop's margin of safety in dollars. 3. Use the coffee shop's operating leverage factor (using the October contribution margin income statement) to determine its new operating income if sales volume increases 13%. Prove your results using the contribution margin income statement format. Assume that sales mix remains unchanged