ACC202 Test 5
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Creamy sells two dozen plain donuts for every dozen every dozen custard-filled donuts. A dozen plain donuts sells for $ 3.40, with total variable cost of $1.36 per dozen. A dozen custard-filled donuts sells for
$7.00, with total variable cost of $2.80 per dozen.
Question content area bottom
Part 1
Requirement 1. Calculate the weighted-average contribution margin. (Round all currency amounts to the nearest cent.)
Plain
Filled
Total
Sales price per unit
3.40
7.00
-
Variable cost per unit
1.36
2.80
Contribution margin per unit
2.04
4.20
×
Sales mix in units
2
1
3
Contribution margin
4.08
4.20
8.28
Weighted-average contribution margin per unit
Part 2
Requirement 2. Determine Creamy'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—total dozens of donuts to be sold. (Complete all input fields. Enter a "0" for any zero balances. Enter currency amounts to the nearest cent.
Abbreviation used: Weighted-avg. CM = weighted-average contribution margin.)
(
Fixed cost
+
Target profit
) ÷
Weighted average Contribution Margin
=
Required sales in units
(
45,540
+
0)
÷
2.76
=
16500
Part 3
Determine Creamy's monthly breakeven point in dozens of plain donuts and custard-filled donuts.
The breakeven point is
11,000
dozen plain donuts and
5,500
dozen custard-filled donuts.
2.76
?
Part 4
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
37,400
38,500
75,900
Variable Costs
14960
15400
30,360
Contribution Margin
22440
23100
45,540
Fixed Costs
45,540
Operating Income
0
Part 5
Requirement 3. Compute Creamy's margin of safety in dollars for August 2024. (The contribution margin income statement provided should be used to determine any expected results.)
Total Sales
-
Breakeven Sales
=
Margin of safety in dollars
129,000
-
75,900
=
53,100
Part 6
Requirement 4. Compute the degree of operating leverage for Creamy Donuts. Estimate the new operating income if total sales increase by 30%. (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 Creamy Donuts. (Round the degree of operating leverage to four decimal places, X.XXXX.)
Contribution Margin
÷
Operating Income
=
Degree of operating leverage
77,400
÷
31,860
=
2.4294
Part 7
Estimate the new operating income if total sales increase by 30%. (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
$55,080
.
Part 8
Requirement 5.
Prove your answer to Requirement 4 by preparing a contribution margin income statement with a 30% increase in total sales. (The sales mix remains unchanged.)
Creamy Donuts
Contribution Margin Income Statement
Month Ended August 31, 2024
Net Sales Revenue
167,700
Variable Costs
67,080
Contribution Margin
100,620
Fixed Costs
45,540
Operating Income
55,080
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