Cove\'s Cakes is a local bakery. Price and cost information follows $ 14.21 Pric
ID: 2543592 • Letter: C
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.) 2.32 1.09 0.15 $4,260.00 Fixed cost per month Required 1. Calculate Cove's new break-even point under each of the following independent scenarios: (Round your answer to the nearest whole number.) a. Sales price increases by $1.80 per cake Break-Even Point cakes b. Fixed costs increase by $505 per month. Break-Even Point cakes c. Variable costs decrease by $0.42 per cake en cakes d. Sales price decreases by $0.50 per cake. en cakesExplanation / Answer
price per cake 14.21 Variable cost per cake ingredients 2.32 Direct labor 1.09 overhead 0.15 3.56 Contribution margin per cake 10.65 Break even point(units) = fixed cost/contribution margin per unit 1a) when sale increases by $1.80 per cake contribution will also increase by the same amount 4260/(10.65+1.80) BEP 342 Cakes answer b) fixed cost increase by 505 per month (4260+505)/10.65 447 BEP 447 Cakes answer c) Variable cost decrease by 0.42 per caje leading to increase in contribution (4260)/(10.65+.42) 385 BEP 385 Cakes answer d) when sale decreases by $.50 per cake contribution will also decrease by the same amount 4260/(10.65-.50) BEP 420 Cakes answer 2) contibution (425*10.65)= 4526.25 less fixed cost -4260 net income 266.25 degree of operating leverage = contribution/net income 4526.25/266.25 17 3) Effect on profit = increase of sales revenue *degree of operating leverage 12%*17 204 % Effect on profit 204%