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    Calculating breakeven point for two product lines

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    Calculating breakeven point for two product lines; margin of safety
    The contribution margin income statement of Cosmic Donuts for March 2012follows:

    Contribution Margin Income Statement
    For the month of March 2012
    Sales revenue $127,000
    Variable costs:
    Cost of goods sold $32,400
    Marketing costs 17,300
    General and administrative cost 10,625 60,325
    Contribution margin 66,675
    Fixed costs:
    Marketing costs 56,700
    General and administrative cost 6,300 63,000
    Operating income $3,675

    Cosmic sells two dozens plain donuts for every dozen custard-filled donuts. A dozen plain donuts sells for $6, with total variable cost of $2 per dozen custard-filled donuts sells for $8, with total variable cost of $5.50 per dozen.

    1. Determine Cosmic'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.
    2. Compute Cosmic's margin of safety in dollars for March 2012
    3. If Cosmic can increase monthly sales volume by 10% what will operating income be? (The sales mix remains uncharged.)

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