Question 2 The contribution margin income statement of DogGer, selling hotdogs and burgers, for September 20x9 is as follows: S 151,500 DogGer Contribution Margin Income Statement Month ended September 30, 2019 s Net sales revenue Variable costs: Cost of goods sold 40,000 Selling costs 17,900 Administrative costs 7.300 Contribution margin Fixed costs: Selling costs 25,400 Administrative costs 8.700 Operating income 65.200 86,300 34.100 52,200 DogGer sells four hotdogs for every burger sold. A hotdog sells for $18.00, with total variable cost of $8.20. A burger sells for $26.00, with total variable cost of $10.20. Required: 1. Calculate the weighted average contribution margin. (5 marks) 2. Determine DogGer's monthly breakeven point in units for hotdogs and burgers respectively. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. In the statement, show only two categories of costs: variable and fixed. (5 marks) 3. Calculate the margin of safety of DogGer in dollars for September 20x9. (5 marks) 4. Compute the degree of operating leverage for DogGer. Estimate the new operating income if total sales increase by 35%. (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 marks) 5. Prove your answer to (4) by preparing a contribution margin income statement with a 35% increase in total sales. (The sales mix remains unchanged.) (5 marks) Question 2 The contribution margin income statement of DogGer, selling hotdogs and burgers, for September 20x9 is as follows: S 151,500 DogGer Contribution Margin Income Statement Month ended September 30, 2019 s Net sales revenue Variable costs: Cost of goods sold 40,000 Selling costs 17,900 Administrative costs 7.300 Contribution margin Fixed costs: Selling costs 25,400 Administrative costs 8.700 Operating income 65.200 86,300 34.100 52,200 DogGer sells four hotdogs for every burger sold. A hotdog sells for $18.00, with total variable cost of $8.20. A burger sells for $26.00, with total variable cost of $10.20. Required: 1. Calculate the weighted average contribution margin. (5 marks) 2. Determine DogGer's monthly breakeven point in units for hotdogs and burgers respectively. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. In the statement, show only two categories of costs: variable and fixed. (5 marks) 3. Calculate the margin of safety of DogGer in dollars for September 20x9. (5 marks) 4. Compute the degree of operating leverage for DogGer. Estimate the new operating income if total sales increase by 35%. (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 marks) 5. Prove your answer to (4) by preparing a contribution margin income statement with a 35% increase in total sales. (The sales mix remains unchanged.)
