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.) ( Fixed expenses + Operating income ) / = 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.) Small Large Total Sales price per unit 2 4 Less: Variable expense per unit 1 2 Sales mix in units 75% 25% Contribution margin Contribution margin per unit 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 March contribution margin income statement) to determine its new operating income if sales volume increases 15 %. 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.) Krazy Kup Coffee's operating leverage factor is . If Krazy Kup Coffee can increase sales revenue by 15%, 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 "0" in the appropriate cell.) Krazy Kup Coffee Effect on Operating Income of 15% Increase in Sales Volume Current level Percent increase Dollar increase Sales revenue 15% Less: Variable expenses 15% Contribution margin Change in fixed expenses Operating income before sales increase Operating income after sales increase

Krazy Kup Coffee
Contribution Margin Income Statement
Month Ended March 31
Sales revenue				$100,000
Less variable expenses:
	Cost of goods sold		$34,500
	Marketing expense		13,000
	General and administrative expense		2,500	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

The contribution margin income statement of Krazy Kup Coffee for March follows: (Click the icon to view the contribution margin income statement.) Krazy Kup 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 breakeverypoint 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. ve Begin by identifying the formula to compute the total breakeven point in units. (Abbreviations used: avg Average: CM Contribution margin.) Fred expertos . Operating income ) Weighed-avg. CM per unit - Breakeven sales in units Now calculate the weighted average contribution margin per unit (Round the weighted average contribution margin per unit to the nearest cont.) Data Table ma 0. $ 100,000 p. A larg 34,500 inco Sales revenue Less variable expenses: Cost of goods sold Marketing expense General and administrative expens Contribution margin Less fixed expenses: Marketing expense 13,000 2,500 your ans and fixe 50,000 la to bution m $ 50,000 vers he neares 21,250 3,750 General and administrative expense 25,000 Operating income $ 25,000 er ar Print Done Small Large Total Sales price per unit Less: Variable expense per unit Sales mix in units Contribution margin Contribution marin ner unit Contribution margin per unit 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 ans to enter "0" in the appropriate cell.) Small Large Total Less: 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. se the coffee shop's operating leverage factor (using the March contribution margin income statement) to determine is now operating income sales volume increases 15% 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.) Krazy Kup Coffee's operating leverage factor is If Krazy Kup Coffee can increase sales revenue by 15%, 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, appropriate cell.) Krazy Kup Coffee Effect on Operating Income of 15% Increase in Sales Volume Current level Percent increase y Dollar increase Sales revenue 15% Less: Variable expenses 15% Read the requirements wur UV UOL Sales revenue 15% 15% Less: Variable expenses Contribution margin Change in fixed expenses Operating income before sales increase Operating income after sales increase