The contribution margin income statement of Margot Coffee for February follows:

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.

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 remainsunchanged.

  • CreatedAugust 27, 2014
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