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

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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
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.)
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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