Question

Save Homework: Chapter 20 Homework Assignment Score: 0 of 1 pt 1 of 1 (0 complete) P20-41A (similar to) HW Score: 0%, 0 of 1 pt Question Help The contribution margin income statement of Sweet Pea Donuts for August 2018 follows: (Click the icon to view the contribution margin income statement.) Sweet Pea 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 $8.00, with total variable cost of $3.20 per dozen. Read the requirements Requirement 1. Calculate the weighted average contribution margin (Round all currency amounts to the nearest cent.) Plain Filled Total Contribution margin Weighted average contribution margin per unit

Answer 1

Calculation of weighted average contribution margin
	Plain	Filled	Total
Selling price	4	8
Less: Variable cost	1.6	3.2
Contribution margin per unit	2.4	4.8
Sales mix	4	1	5
Contribution margin	9.6	4.8	14.4
Weighted average contribution margin			2.88
Break even point = Fixed costs/Weighted average contribution margin
12000	Units
Plain	9600
Filled	2400
Contribution Margin Income Statement
	Plain	Filled	Total
Selling price	38,400	19,200	57,600
Less: Variable cost	15,360	7,680	23,040
Contribution margin per unit	23,040	11,520	34,560
Less: Fixed costs			34,560
Operating income			-
Margin of safety in dollars = Sales - Break even sales
69,400
Degree of operating leverage = Contribution margin/Operating income
1.829971182
Increase In operating income = Increase in sales*Degree of operating leverage
18.23
New operating income	49230.972
Contribution Margin Income Statement
Sales	139700
Less: Variable cost	55880
Contribution margin per unit	83820
Less: Fixed costs	34560
Operating income	49260
Less: Old operating income	41640
Increase	7620
% increase	15.47%