### Use pepperpike coffee''s operating lev

Assignment Help Managerial Accounting
##### Reference no: EM13972876

The contribution margin income statement of Pepperpike Coffee for February follows:
Pepperpike Coffee
Contribution Margin Income Statement
For month ended February 29
Sales revenue......................................................................\$103,000
Variable expenses:
Cost of goods sold............................................................... \$28,000
Marketing expense ............................................................. \$ 10,000
41,000
Contribution margin.............................................................\$62,000
Fixed expenses:
Marketing expense.............................................................. \$34,650
General and administrative expense.................................... \$ 7,350
42,000
Operating income................................................................\$20,000
Pepperpike Coffee sells three small coffees for every large coffee. A small coffee sells for \$3.00, with a variable expense of \$1.50. A large coffee sells for \$5.00, with a variable expense of \$2.50

Requirements:

1. Determine Pepperpike Coffee's monthly breakeven point in the numbers of small coffees and large coffees. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales. Show only two categories of expenses: variable and fixed.

2. Compute Pepperpike Coffee's margin of safety in dollars.

3. Use Pepperpike Coffee's operating leverage factor to determine its new operating income if sales volume increases 15%. Prove your results using the contribution margin income statement format. Assume the sales mix remains unchanged.

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