Calculating breakeven point for two products, margin of safety, and operating leverage The contribution margin income statement of Delectable Donuts for August 2020 follows: DELECTABLE DONUTS Contribution Margin Income Statement Month Ended August 31,2020 Sales Revenue $ 150,000 Variable Costs: Cost of Goods Sold $ 41,000 Selling Costs 15,000 Administrative Costs 4,000 60,000 Contribution Margin 90,000 Fixed Costs: Selling Costs 37,800 Administrative Costs 12,600 50,400 Operating Income $ 39,600 Delectable 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 $5.00, with total variable cost of $2.00 per dozen. Requirements
Calculating breakeven point for two products, margin of safety, and operating leverage The contribution margin income statement of Delectable Donuts for August 2020 follows: DELECTABLE DONUTS Contribution Margin Income Statement Month Ended August 31,2020 Sales Revenue $ 150,000 Variable Costs: Cost of Goods Sold $ 41,000 Selling Costs 15,000 Administrative Costs 4,000 60,000 Contribution Margin 90,000 Fixed Costs: Selling Costs 37,800 Administrative Costs 12,600 50,400 Operating Income $ 39,600 Delectable 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 $5.00, with total variable cost of $2.00 per dozen. Requirements
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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![Calculating breakeven point for two products, margin of safety, and operating leverage
The contribution margin income statement of Delectable Donuts for August 2020 follows:
DELECTABLE DONUTS
Contribution Margin Income Statement
Month Ended August 31,2020
Sales Revenue
$ 150,000
Variable Costs:
Cost of Goods Sold
$ 41,000
Selling Costs
15,000
Administrative Costs
4,000
60,000
Contribution Margin
90,000
Fixed Costs:
Selling Costs
37,800
Administrative Costs
12,600
50,400
Operating Income
$ 39,600
Delectable 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 $5.00, with total variable cost of $2.00 per dozen.
Requirements](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5e8ab320-a83e-481a-973c-45196dab667b%2F6af7c562-7ecd-4970-8913-4eaf411264a5%2Fcr3upwg_processed.png&w=3840&q=75)
Transcribed Image Text:Calculating breakeven point for two products, margin of safety, and operating leverage
The contribution margin income statement of Delectable Donuts for August 2020 follows:
DELECTABLE DONUTS
Contribution Margin Income Statement
Month Ended August 31,2020
Sales Revenue
$ 150,000
Variable Costs:
Cost of Goods Sold
$ 41,000
Selling Costs
15,000
Administrative Costs
4,000
60,000
Contribution Margin
90,000
Fixed Costs:
Selling Costs
37,800
Administrative Costs
12,600
50,400
Operating Income
$ 39,600
Delectable 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 $5.00, with total variable cost of $2.00 per dozen.
Requirements
![4 Compute the degree of operating leverage for Delectable Donuts. Estimate the
new operating income if total sales increase by 20%. (Round the degree of
operating leverage to four decimal places and the final answer to the nearest
dollar. Assume the sales mix remains unchanged.)
5 Prove your answer to Requirement 4 by preparing a contribution margin
income statement with a 20% increase in total sales. (The sales mix remains
unchanged.)](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5e8ab320-a83e-481a-973c-45196dab667b%2F6af7c562-7ecd-4970-8913-4eaf411264a5%2Fg5vvio_processed.png&w=3840&q=75)
Transcribed Image Text:4 Compute the degree of operating leverage for Delectable Donuts. Estimate the
new operating income if total sales increase by 20%. (Round the degree of
operating leverage to four decimal places and the final answer to the nearest
dollar. Assume the sales mix remains unchanged.)
5 Prove your answer to Requirement 4 by preparing a contribution margin
income statement with a 20% increase in total sales. (The sales mix remains
unchanged.)
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