Cove\'s Cakes is a local bakery. Price and cost information follows Price per ca
ID: 2330417 • Letter: C
Question
Cove's Cakes is a local bakery. Price and cost information follows Price per cake Variable cost per cake S 14.91 2.23 1.16 0.30 $4,151.40 Direct labor Overhead (box, etc.) Fixed cost per month Required 1. Determine Cove's break-even point in units and sales dollars. (Round your Break-Even Units answer to the nearest whole number. Round your other intermediate calculations and sales dollars answer to 2 decimal places.) Break-Even Units Cakes Break-Even Sales Dollars 2. Determine the bakery's margin of safety if it currently sells 420 cakes per month. (Round your intermediate calculations to 2 decimals. Round the break-even units and final answer to nearest whole dollar.) of 3. Determine the number of cakes that Cove must sell to generate $2,200 in profit. (Round your intermediate calculations to 2 decimal places and final answer to nearest whole number.) Sales Units CakesExplanation / Answer
1) Calculation of Contribution Rate: Contribution= selling price- variable cost per unit = 14.91-(2.23+1.16+0.30)= 14.91- 3.69= 11.22 Calculation of break even sales in unit and dollars: Break even sales(in units)= Fixed cost/ contribution per unit = 4151.40/11.22= 370cakes Break even sales(in units)= 370 cakes Break even sales(in dollars)= Break even point in units* selling price = 370*14.91= $5516.70 Therefore break even sales in dollars is $5516.70 2) Calculation of margin of safety: Total sales= 420*14.91=6262.20 Margin of safety= Total sales- break even sales = 6262.20-5516.70= $745.50 Margin of safety= $745.50 3) Calculation of target sales units: Target sale units= (Fixed cost+target profit)/ contribution per unit = (4151.40+2200)/11.22= 556.08 target sale units= 556 cakes