The contribution margin income statement of Nice Cup Company for 31 December 2011 follows:
Nice Cup Company
Contribution Margin Income Statement
Year Ended December 31, 2011
Cost of goods sold
General and administrative costs
Nice Cup Company sells two dozen of chocolate cupcake for every dozen of blueberry cupcake. A dozen chocolate cup cake plain donuts sells for RM6, with total variable cost of RM2 per dozen. A dozen blueberry cupcake sells for RM8, with total variable cost of RM5.50 per dozen.
a) Determine Nice Cup Company's monthly breakeven point in dozens of chocolate cupcake and blueberry flavor cupcake. Prove your answer by preparing a summary contribution margin income statement at the breakeven level of sales.
b) Compute Nice Cup Company's margin of safety in value for December 2011.
c) If Nice Company can increase monthly sales volume by 10%, what will operating income be? (The sales mix remains unchanged.)
a) Explain the term sales mix in your own words. How does sales mix affect the contribution margin?
b) Explain how to calculate a weighted average contribution margin per unit.