The contribution margin income statement of Cosmic Coffee for February follows. Cosmic 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 Cosmic Coffee€™s monthly break-even point in 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 Cosmic Coffee€™s margin of safety in dollars.
3. Use Cosmic 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 remains unchanged.

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Cosmic Coffee Contribution Margin Income Statement For the Month Ended February 29 Sales revenue 588,000 Variable expenses: Cost of goods sold Marketing expense General and administrative expense $30,000 8,000 2,000 40,000 48,000 Contribution margin Fixed expenses: Marketing expense General and administrative expense 34,650 7,350 42,000 S 6,000