The contribution margin income statement of Margot Coffee for February follows: Margot Coffee sells three small coffees
Question:
Margot Coffee sells three small coffees for every large coffee. A small coffee sells for $ 3.00, with a variable expense of $ 1.50. A large coffee sells for $ 5.00, with a variable expense of $ 2.50.
Requirements
1. Determine Margot Coffee's monthly breakeven point in numbers of small coffees and large coffees. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of expenses: variable and fixed.
2. Compute Margot Coffee's margin of safety in dollars.
3. Use Margot Coffee's operating leverage factor to determine its new operating income if sales volume increases by 15%. Prove your results using the contribution margin income statement format. Assume the sales mix remain sun changed.
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