Krazy Cream sells two dozen plain donuts for every dozen custard-filled donuts. A dozen plain donuts sells for $4.00, with total variable cost of $1.60 per dozen. A dozen custard-filled donuts sells for $8.00, with total variable cost of $3.20 per dozen.

Krazy Cream DonutsContribution Margin Income StatementMonth Ended August 31, 2018Net Sales Revenue $128,000Variable Costs: Cost of Goods Sold$32,500 Selling Costs17,200 Administrative Costs1,50051,200Contribution Margin 76,800Fixed Costs: Selling Costs21,600 Administrative Costs7,20028,800Operating Income $48,000

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. (Enter a "0" for any zero balances.)

Krazy Cream DonutsContribution Margin Income Statement PlainFilledTotalNet Sales Revenue Variable Costs Contribution Margin Fixed Costs Operating Income

Requirement 3. Compute

Krazy Cream's

margin of safety in dollars for

August

2018.

(The contribution margin income statement provided should be used to determine any expected results.)

- =Margin of safety in dollars - =

Part 6

Requirement 4. Compute the degree of operating leverage for

Krazy Cream

Donuts. Estimate the new operating income if total sales increase by

20%.

(Round the degree of operating leverage to four decimal places and the final answer to the nearest dollar. Assume the sales mix remains unchanged.)

Begin by computing the degree of operating leverage for

Krazy Cream

Donuts. (Round the degree of operating leverage to four decimal places, X.XXXX.)

=Degree of operating leverage =

Part 7

Estimate the new operating income if total sales increase by

20%.

(Round interim calculations to four decimal places and your final answer to the nearest dollar. Assume the sales mix remains unchanged.)

The estimated operating income will be .

Part 8

Requirement 5. Prove your answer to Requirement 4 by preparing a contribution margin income statement with a

20%

increase in total sales. (The sales mix remains unchanged.)

Krazy Cream DonutsContribution Margin Income StatementMonth Ended August 31, 2018Net Sales Revenue Variable Costs Contribution Margin Fixed Costs Operating Income