90.2K

Verified Solution

Link Copied!

The contribution margin income statement of first choice coffee for july follows :

1.	Determine the coffee shop'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 the coffee shop's margin of safety in dollars.
3.	Use the coffee shop's operating leverage factor (using the july contribution margin income statement) to determine its new operating income if sales volume increases 12% .Prove your results using the contribution margin income statement format. Assume that sales mix remains unchanged.

Coffee sells three small coffees for every large coffee. A small coffee sells for$2.00 ,with a variable expense of $1.00 A large coffee sells for $4.00, with a variable expense of $2.00.

Data table Requirement 1. Determine the coffee shop'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. Begin by identifying the formula to compute the total breakeven point in units. (Abbreviations used: avg. = Average; CM = Contribution margin.) Requirement 2. Compute the coffee shop's margin of safety in dollars. dentify the formula to compute the margin of safety in dollars. =Marginofsafetyindollars The margin of safety in dollars is jour results using the contribution margin income statement format. Assume that sales mix remains unchanged. dentify the formula to compute the operating leverage factor. dentify the formula to compute the operating leverage factor. Round your answer to two decimal places.) First Choice Coffee's operating leverage factor is If First Choice Coffee can increase sales revenue by 12%, keeping the sales mix the same, operating income will be Prepare a summary contribution margin income statement to prove your answer above. (For amounts with a $0 balance, make sure to enter "0" in the appropriate input field.)

Answer & Explanation Solved by verified expert

See Answer