Question
Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $1,100 and the
Espresso Express operates a number of espresso coffee stands in busy suburban malls. The fixed weekly expense of a coffee stand is $1,100 and the variable cost per cup of coffee served is $0.44.
Required: 1. Fill in the following table with your estimates of the company's total cost and average cost per cup of coffee at the indicated levels of activity. 2. Does the average cost per cup of coffee served increase, decrease, or remain the same as the number of cups of coffee served in a week increases?
Engberg Company installs lawn sod in home yards. The companys most recent monthly contribution format income statement follows:
Amount | Percent of Sales | |
---|---|---|
Sales | $ 131,000 | 100% |
Variable expenses | 52,400 | 40 |
Contribution margin | 78,600 | 60% |
Fixed expenses | 17,000 | |
Net operating income | $ 61,600 |
Required:
1. What is the companys degree of operating leverage?
2. Using the degree of operating leverage, estimate the impact on net operating income of a 12% increase in unit sales.
3. Construct a new contribution format income statement for the company assuming a 12% increase in unit sales.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started