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The contribution margin income statement of Awesome Coffee for January follows: (Click the icon to view the contribution margin income statement.) Awesome Coffee sells
The contribution margin income statement of Awesome Coffee for January follows: (Click the icon to view the contribution margin income statement.) Awesome 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. 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 January contribution margin income statement) to determine its new operating income if sales volume increases 17%. Prove your results using the contribution margin income statement format. Assume that sales mix remains unchanged.
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