Reference no: EM13516661

Calculating breakeven point for two products; margin of safety The contribution margin income statement of Delectable Donuts for August 2012 follows:

DELECTABLE DONUTS Contribution Margin Income Statement For the Month of August 2012
Sales revenue		$ 150,000
Variable costs:
Cost of goods sold	15,000
Marketing costs	4,000	$ 90,000
Contribution margin	$ 41,000	60,000
Marketing costs	12,600	$ 39,600
Operating income	37,800	50,400

Delectable sells four dozen plain donuts for every dozen custard-filled donuts. A dozen plain donuts sells for $4, with total variable cost of $1.60 per dozen. A dozen custard-filled donuts sells for $5, with total variable cost of $2 per dozen.

Requirements

1. Calculate the weighted-average contribution margin.

2. Determine Delectable'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.

3. Compute Delectable's margin of safety in dollars for August 2012.

4. If Delectable can increase monthly sales revenue from August's level by 20%, what will operating income be? (The sales mix remains unchanged.)