Too Sweet Donuts Contribution Margin Income Statement Month Ended August 31, 2018 Net Sales Revenue $ 128,000 Variable Costs: Cost of Goods Sold $ 32,200 Selling Costs 17,300 Administrative Costs 1,700 51,200 Contribution Margin 76,800 Fixed Costs: Selling Costs 32,400 Administrative Costs 10,800 43,200 33,600 Operating Income $ Too Sweet sells four 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 $8.00, with total variable cost of $3.20 per dozen. Read the requirements Requirement 1. Calculate the weighted average contribution margin. (Round all currency amounts to the nearest cent.) Plain Filled Total Sales price per unit Variable cost per unit Contribution margin per unit Sales mix in units Contribution margin Weighted average contribution margin per unit 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 products, 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 + + Determine Too Sweet's monthly breakeven point in dozens of plain donuts and custard-filled donuts. The breakeven point is dozen plain donuts and dozen 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. Too Sweet Donuts Contribution Margin Income Statement Plain Filled Total Net Sales Revenue Variable Costs Contribution Margin Fixed Costs Operating Income Requirement 3. Compute Too Sweet's margin of safety in dollars for August 2018. (The contribution margin income statement provided should be used to d Expected sales in dollars Breakeven sales in dollars = Margin of safety in dollars Requirement 4. Compute the degree of operating leverage for Too Sweet Donuts. Estimate the new operating income if total sales increase by 40%. (Roun remains unchanged.) Begin by computing the degree of operating leverage for Too Sweet Donuts. (Round the degree of operating leverage to four decimal places, X.XXXX.) Contribution margin 1 Operating income = Degree of operating leverage Estimate the new operating income if total sales increase by 40% (Round interim calculations to four decimal places and your final answer to the nearest do The estimated operating income will be $ Requirement 5. Prove your answer to Requirement 4 by preparing a contribution margin income statement with a 40% increase in total sales. Too Sweet Donuts Contribution Margin Income Statement Month Ended August 31, 2018 Net Sales Revenue Variable Costs Contribution Margin Fixed Costs Operating Income 1. Calculate the weighted-average contribution margin. 2. Determine Too Sweet'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 Too Sweet's margin of safety in dollars for August 2018 4. Compute the degree of operating leverage for Too Sweet 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.)
