Cove\'s Cakes is a local bakery. Price and cost information follows: $ 14.21 Pri

Question

Cove's Cakes is a local bakery. Price and cost information follows: $ 14.21 Price per cake Variable cost per cake Ingredients Direct labor Overhead (box, etc.) Fixed cost per month 2.35 1.15 0.11 $3,392.00 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 Break-Even Sales Dollars 320 Cakes $ 4,547.20 2. Determine the bakery's margin of safety if it currently sells 400 cakes per month. (Round your intermediate calculations to 2 decimals. Round the break-even units and final answer to nearest whole dollar.) Margin of Safety 3. Determine the number of cakes that Cove must sell to generate $1,000 in profit. (Round your intermediate calculations to 2 decimal places and final answer to nearest whole number.) Target Sales Units Cakes

Explanation / Answer

2) Margin of safety = 400-320 = 80 cakes

Margin on safety dollar = 80*14.21 = 1136.80 or $1137

3) Target unit sales = (desired profit+fixed cost)/Contribution margin per unit

= (1000+3392)/10.6

Target unit sales = 414 Cakes

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