Use pepperpike coffees operating leverage factor to


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
General and administrative expense...................................$ 3,00041,000
Contribution margin.............................................................$62,000

Fixed expenses:

Marketing expense.............................................................. $34,650
General and administrative expense.................................... $ 7,35042,000Operating 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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Managerial Accounting: Use pepperpike coffees operating leverage factor to
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