Question

The contribution margin income statement of CreamyCreamy Donuts for August 2018 CreamyCreamy sells four dozen plain donuts for every dozen​ custard-filled donuts. A dozen plain donuts sells for $4.00​, with total variable cost of $1.60 per dozen. A dozen​ custard-filled donuts sells for $7.00​, with total variable cost of $2.80 per dozen.Read the requiremen

Requirement 1. Calculate the​ weighted-average contribution margin.​ (Round all currency amounts to the nearest​ cent.)

		Plain	Filled	Total
Sales price per unit
-	Variable cost per unit
Contribution margin per unit
x	Fixed cost per unit
Contribution margin
Weighted-average contribution margin per unit

Requirement 2. Determine CreamyCreamy​'s monthly breakeven point in dozens of plain donuts and​ custard-filled donuts. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of​ costs: variable and fixed.​We'll begin with the breakeven point. Start by selecting the formula and entering the amounts to compute the breakeven point in units for the​ "package" of products long dash—total dozens of donuts to be sold. ​(Complete all answer boxes. Enter a​ "0" for any zero balances. Enter currency amounts to the nearest cent. Abbreviation​ used: Weighted-avg. CM​ = weighted-average contribution​ margin.)

(		+		) /		=	Required sales in units
(		+		) /		=

Determine CreamyCreamy​'s monthly breakeven point in dozens of plain donuts and​ custard-filled donuts.

The breakeven point is

dozen plain donuts and

dozen custard-filled donuts.

Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of​ costs: variable and fixed. ​(Enter a​ "0" for any zero​ balances.)

Creamy Donuts
Contribution Margin Income Statement
		Plain	Filled	Total
Net Sales Revenue
Variable Costs
Contribution Margin
Fixed Costs
Operating Income

Requirement 3. Compute CreamyCreamy​'s margin of safety in dollars for August 2018. ​(The contribution margin income statement provided should be used to determine any expected​ results.)

	-		=	Margin of safety in dollars
	-		=

Requirement 4. Compute the degree of operating leverage for CreamyCreamy Donuts. Estimate the new operating income if total sales increase by 10%. (Round the degree of operating leverage to four decimal places and the final answer to the nearest dollar. Assume the sales mix remains​ unchanged.) Begin by computing the degree of operating leverage for CreamyCreamy Donuts. ​(Round the degree of operating leverage to four decimal​ places, X.XXXX.)

	/		=	Degree of operating leverage
	/		=

Estimate the new operating income if total sales increase by 10% (Round interim calculations to four decimal places and your final answer to the nearest dollar. Assume the sales mix remains​ unchanged.)

The estimated operating income will be $

.

Requirement 5. Prove your answer to Requirement 4 by preparing a contribution margin income statement with a 10% increase in total sales.​ (The sales mix remains​ unchanged.)

Creamy Donuts
Contribution Margin Income Statement
Month Ended August 31, 2018
Net Sales Revenue
Variable Costs
Contribution Margin
Fixed Costs
Operating Income

Data Table

Creamy Donuts
Contribution Margin Income Statement
Month Ended August 31, 2018
Net Sales Revenue			$130,000
Variable Costs:
	Cost of Goods Sold	$32,000
	Selling Costs	17,500
	Administrative Costs	2,500	52,000
Contribution Margin			78,000
Fixed Costs:
	Selling Costs	24,840
	Administrative Costs	8,280	33,120
Operating Income			$44,880

Answer 1