# Question

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

Westlake 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 Westlake Coffee’s monthly breakeven point in the 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 Westlake Coffee’s margin of safety in dollars.

3. Use Westlake Coffee’s operating leverage factor to determine its new operating in-come if sales volume increases 15%. Prove your results using the contribution margin income statement format. Assume that sales mix remainsunchanged.

Westlake 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 Westlake Coffee’s monthly breakeven point in the 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 Westlake Coffee’s margin of safety in dollars.

3. Use Westlake Coffee’s operating leverage factor to determine its new operating in-come if sales volume increases 15%. Prove your results using the contribution margin income statement format. Assume that sales mix remainsunchanged.

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