Er $1 i Data Table bf e: n 11 un Extreme Coffee Contribution Margin Income Statement Month Ended August 31 Sales revenue $ 100,000 Less variable expenses: Cost of goods sold $ 36,000 Marketing expense 11,000 General and administrative expense 3,000 50,000 Contribution margin $ 50,000 Less fixed expenses: Marketing expense $ 21,250 General and administrative expense 3,750 25,000 $ Operating income 25,000 Print Done bra the coffee shone month brokovno sont in the numbers of small coffee and lame coffene Pro exp i Requirements in Init 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 August contribution margin income statement) to determine its new operating income if sales volume increases 16%. Prove your results using the contribution margin income statement format. Assume that sales mix remains unchanged. Print Done humor per UT The contribution margin income statement of Extreme Coffee for August follows: (Click the icon to view the contribution margin income statement.) Extreme 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. Read the requirements. Requirement 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. Begin by identifying the formula to compute the total breakeven point in units. (Abbreviations used: avg. = Average; CM = Contribution margin.) Breakeven sales in units Now calculate the weighted average contribution margin per unit. (Round the weighted average contribution margin per unit to the nearest cent.) Large Total Small Less: Weighted average contribution margin per unit The breakeven point is small cups and large cups of coffee. Prepare a summary contribution margin income statement to prove your answer above. (Complete all answer boxes. For amounts with a $0 balance, make sure to enter "0" in the appropriate cell.) Small Large Total Less: Less: Operating income Requirement 2. Compute the coffee shop's margin of safety in dollars. Identify 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 August contribution margin income statement) to determine its new operating income if sales volume increases 16%. Prove your results using the contribution margin income statement format. Assume that sales mix remains unchanged. Identify the formula to compute the operating leverage factor. = Operating leverage factor (Round your answer to two decimal places.) Extreme Coffee's operating leverage factor is If Extreme Coffee can increase sales revenue by 16%, keeping the sales mix the same, operating income will be $ Prepare a summary contribution margin income statement to prove your answer above. (For amounts with a $0 balance, make sure to enter "O" in the appropriate cell.) Extreme Coffee Effect on Operating Income of 16% Increase in Sales Volume Current level Percent increase Dollar increase Sales revenue 16% Less: Variable expenses 16% Contribution margin Change in fixed expenses Operating income before sales increase Operating income after sales increase
