The contribution margin income statement of

Creative

Donuts for

August

2024

follows:

Data table

Creative Donuts
Contribution Margin Income Statement
Month Ended August 31, 2024
Net Sales Revenue			$127,000
Variable Costs:
	Cost of Goods Sold	$32,600
	Selling Costs	16,600
	Administrative Costs	7,950	57,150
Contribution Margin			69,850
Fixed Costs:
	Selling Costs	34,650
	Administrative Costs	11,550	46,200
Operating Income			$23,650

Question content area top right

Part 1

Creative

sells

five

dozen plain donuts for

every two dozen

custard-filled donuts. A dozen plain donuts sells for

$4.00,

with total variable cost of

$1.80

per dozen. A dozen custard-filled donuts sells for

$6.80,

with total variable cost of

$3.06

per dozen.

Requirements

1.	Calculate the weighted-average contribution margin.
2.	Determine Creative's monthly breakeven point in dozens of plain donuts and custard-filled donuts. 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.
3.	Compute Creative's margin of safety in dollars for August 2024.
4.	Compute the degree of operating leverage for Creative Donuts. Estimate the new operating income if total sales increase by 40%. (Round the degree of operating leverage to four decimal places and the final answer to the nearest dollar. Assume the sales mix remains unchanged.)
5.	Prove your answer to Requirement 4 by preparing a contribution margin income statement with a 40% increase in total sales. (The sales mix remains unchanged.)

Question content area bottom

Part 1

Requirement 1. Calculate the weighted-average contribution margin. (Round all currency amounts to the nearest cent.)

		Plain	Filled	Total
Sales price per unit		$4.00	$6.80
-	Variable cost per unit	1.80	3.06
Contribution margin per unit		2.20	3.74
	Sales mix in units	5	2	7
Contribution margin		$11.00	$7.48	$18.48
Weighted-average contribution margin per unit				$2.64

Part 2

Requirement 2. Determine

Creative's

monthly breakeven point in dozens of plain donuts and custard-filled donuts. 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.

We'll begin with the breakeven point. Start by selecting the formula and entering the amounts to compute the breakeven point in units for the "package" of

productstotal

dozens of donuts to be sold. (Complete all input fields. Enter a "0" for any zero balances. Enter currency amounts to the nearest cent. Abbreviation used: Weighted-avg. CM = weighted-average contribution margin.)

(	Fixed costs	+	Target profit	)	Weighted-avg. CM per unit	=	Required sales in units
(	$46,200	+	$0	)	$2.64	=	17,500

Part 3

Determine

Creative's

monthly breakeven point in dozens of plain donuts and custard-filled donuts.

The breakeven point is

12,500

dozen plain donuts and

5,000

dozen custard-filled donuts.

Part 4

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.)

Creative Donuts
Contribution Margin Income Statement
		Plain	Filled	Total
Net Sales Revenue
Variable Costs
Contribution Margin
Fixed Costs
Operating Income