The contribution margin income statement of Cosmic Coffee for December follows: (Click the icon to view the contribution margin income statement.) Cosmic 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.) ( Fixed expenses 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 cent.) Total Sales price per unit $ Small Large 2.00 $ 4.00 (1.00) (2.00) Less: Variable expense per unit Contribution margin per unit $ 1.00 $ 2.00 Sales mix in units 3 1 4 $ Contribution margin 3.00 $ 2.00 $ 5.00 $ 1.25 Weighted average contribution margin per unit The breakeven point is small cups and large cups of coffee. i X 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 December contribution margin income statement) to determine its new operating income if sales volume increases 11%. Prove your results using the contribution margin income statement format. Assume that sales mix remains unchanged. Print Done The contribution margin income statement of Cosmic Coffee for December follows: (Click the icon to view the contribution margin income statement.) Cosmic 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.) ( Fixed expenses 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 cent.) Total Sales price per unit $ Small Large 2.00 $ 4.00 (1.00) (2.00) Less: Variable expense per unit Contribution margin per unit $ 1.00 $ 2.00 Sales mix in units 3 1 4 $ Contribution margin 3.00 $ 2.00 $ 5.00 $ 1.25 Weighted average contribution margin per unit The breakeven point is small cups and large cups of coffee. i X 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 December contribution margin income statement) to determine its new operating income if sales volume increases 11%. Prove your results using the contribution margin income statement format. Assume that sales mix remains unchanged. Print Done