Cove’s Cakes is a local bakery. Price and cost information follows: Required: 1.

Question

Cove’s Cakes is a local bakery. Price and cost information follows:

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.)

   

2. Determine the bakery’s margin of safety if it currently sells 470 cakes per month. (Round your intermediate calculations to 2 decimals. Round the break-even units and final answer to nearest whole dollar.)

   

3. Determine the number of cakes that Cove must sell to generate $2,700 in profit. (Round your intermediate calculations to 2 decimal places and final answer to nearest whole number.)

Price per cake $ 14.51 Variable cost per cake Ingredients 2.31 Direct labor 1.08 Overhead (box, etc.) 0.20 Fixed cost per month $ 4,149.60

Explanation / Answer

Answer: 1

BEP (units) =Fixed cost/Contribution margin per unit

=$4149/10.92

= 379.95units

BEP ($) =379.95*14.51=$5,513

Answer: 2

MOS=Total sales-Break even sales

= (470*14.51) - 5,513

=1306

Answer: 3

Units required to earn desired profit=Fixed exp+Desired profit/Contribution margin per unit

=$4149+2,700/10.92 =4396 units

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