Question
The contribution margin income statement of Krazy Kustard Donuts for August 2018 follows: Krazy Kustard Donuts Contribution Margin Income Statement Month Ended August 31, 2018
The contribution margin income statement of Krazy Kustard Donuts for August 2018 follows:
Krazy Kustard Donuts | |||
Contribution Margin Income Statement | |||
Month Ended August 31, 2018 | |||
Net Sales Revenue |
| $130,000 | |
Variable Costs: |
|
| |
| Cost of Goods Sold | $32,400 |
|
| Selling Costs | 17,400 |
|
| Administrative Costs | 2,200 | 52,000 |
Contribution Margin |
| 78,000 | |
Fixed Costs: |
|
| |
| Selling Costs | 36,450 |
|
| Administrative Costs | 12,150 | 48,600 |
Operating Income |
| $29,400 |
Katzy sells five dozen plain donuts for every dozen custard-filled donuts. A dozen plain donuts sells for
$ 4.00 with total variable cost of $1.60 per dozen. A dozen custard-filled donuts sells for $7.00, with total variable cost of $2.80 per dozen.
1. | Compute Krazy Kustard's margin of safety in dollars for August 2018. |
2. | Compute the degree of operating leverage for Krazy Kustard Donuts. Estimate the new operating income if total sales increase by 20%. (Round the degree of operating leverage to four decimal places and the final answer to the nearest dollar. Assume the sales mix remains unchanged.) |
3. | Prove your answer to Requirement 4 by preparing a contribution margin income statement with a 20% increase in total sales. (The sales mix remainsunchanged.) |
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