Question

Cove's Cakes is a local bakery. Price and cost information follows: 13.81 Price per cake Variable cost per cake Ingredients Direct labor Overhead (box, etc.) Fixed cost per month 2.34 0.24 $3,740.70 Required: 1. Determine Cove's break-even point in units and sales dollars. 2. Determine the bakery's margin of safety if it currently sells 460 cakes per month 3. Determine the number of cakes that Cove must sell to generate $2,000 in profit. Complete this question by entering your answers in the tabs below. Required 1 Required 2 | Required 3 whole Determine Cove's break-even point in units and sales dollars. (Round your Break Even Units answer to the neand number, Round your other intermediate calculations and sales dollars answer to 2 decimal places.) Cakes Break-Even Units Break-Even Sales Dollars (Required Required 2 >

Answer 1

Required 1 :

Break even units	370	cakes
Break even sales dollars	$5,109.70

working:

contribution per unit = sale price per unit - variable cost per unit

=> 13.81 - (2.34-1.12-0.24)

=>10.11.

break even units =$3740.70 / 10.11

=>370 units.

break even sales dollars =370 units *$13.81

=>$5,109.70.

Required 2:

margin of safety

$1,242.90

margin of safety dollars = (current sales - break even sales)*price per cake

=>(460 cakes - 370 cakes)*$13.81

=>$1,242.90.

Required 3:

Target sale units

568 cakes

number of cakes to generate $2000 in profit.

=> (fixed costs + required profit) / (contribution per unit)

=>(3740.70 +2000) / $10.11.

=>568 cakes