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.

Requirement 3. Compute Krazy Kustard's margin of safety in dollars for August 2018.

Expected sales in dollars	-	Breakeven sales in dollars	=	Margin of safety in dollars
130,000	-	81,000	=	49000

Requirement 4. 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.)

Begin by computing the degree of operating leverage for Krazy Kustard Donuts.)

Contribution margin	/	Operating income	=	Degree of operating leverage
78000	/	29400	=	2.653

Estimate the new operating income if total sales increase by 20%.

The estimated operating income will be $

45000

.