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The contribution margin income statement of Cosmic Coffee for July follows: (Click the icon to view the contribution margin income statement.) Cosmic Coffee sells three
The contribution margin income statement of Cosmic Coffee for July 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.) Requirements - X Breakeven sales in units Data table Cosmic Coffee Contribution Margin Income Statement Month Ended July 31 1. Determine the coffee shop's monthly breakeven paint 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 July contribution margin income statement) to determine its new operating income if sales volume increases 10%. Prove your results using the contribution margin income statement format. Assume that sales mix remains unchanged. Sales revenue Less variable expenses: Cost of goods sold Marketing experse General and administrative expense Contribution margin Less fixed expenses: Print Done $ 108,000 $ 41,500 11,000 1,500 54,000 $ 54,000 Marketing experse $ General and administrative expense 25,500 4,500 30,000 $ 24,000 Operating income - X
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