Calculating breakeven point for two product lines; margin of safetyThe contribution margin income statement of Cosmic Donuts for March 2012follows:COSMIC DONUTSContribution Margin Income StatementFor the month of March 2012Sales revenueVariable costs:Cost of goods soldMarketing costsGeneral and administrative costContribution marginFixed costs:Marketing costsGeneral and administrative costOperating income $127 000$32 40017 30010 625 60 32566 67556 7006 300 63 000$3 675 Cosmic sells two dozens plain donuts for every dozen custard-filled donuts. A dozenplain donuts sells for $6 with total variable cost of $2 per dozen custard-filled donutssells for $8 with total variable cost of $5.50 per dozen.Requirements1. Determine Cosmic’s monthly breakeven point in dozens of plain donuts andcustard-filled donuts. Prove your answer by preparing a summary contributionmargin income statement at the breakeven level of sales. Show only twocategories of costs: variable and fixed.2. Compute Cosmic’s margin of safety in dollars for March 20123. If Cosmic can increase monthly sales volume by 10% what will operating incomebe? (The sales mix remains uncharged.)
