The contribution margin income statement of Extreme Coffee for February follows. Extreme Coffee sells three small coffees for every large coffee. A small coffee sells for $2, with a variable expense of $1. A large coffee sells for $4, with a variable expense of $2.

Requirements
1. Determine Extreme Coffee€™s monthly break-even point in the numbers of small coffees and large coffees. Prove your answer by preparing a summary contribution margin income statement at the break-even level of sales. Show only two categories of expenses: variable and fixed.
2. Compute Extreme Coffee€™s margin of safety in dollars.
3. Use Extreme Coffee€™s operating leverage factor to determine its new operating income if sales volume increases 15%. Prove your results using the contribution margin income statement format. Assume that sales mix remains unchanged.

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EXTREME COFFEE Contribution Margin Income Statement For the Month Ended February 29 Sales revenue $90,000 Variable expenses: Cost of goods sold Marketing expense General and administrative expense $32,000 10,000 3,000 45,000 45,000 Contribution margin Fixed expenses: Marketing expense Gieneral and administrative expense 16,500 3,500 20,000 Operating income