Question

Cove's Cakes is a local bakery. Price and cost information follows: $ 14.71 Price per cake Variable cost per cake Ingredients Direct labor Overhead (box, etc.) Fixed cost per month 2.28 1.10 0.14 $5,147.40 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 540 cakes per month 3. Determine the number of cakes that Cove must sell to generate $1,900 in profit. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 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 460 Cakes 76.07 $ Required 1 Required 2 >

Answer 1

Answer

• All working forms part of the answer
• Requitrement 1

A	Price per cake	$                    14.71
B	Total variable cost per cake	$                       3.52
C = A - B	Contribution margin per cake	$                    11.19
D	Fixed Cost	$              5,147.40
E = C/D	Break Even Units	460	Answer
F = E x A	Break Even Sales Dollars	$              6,766.60	Answer

• Requirement 2

A	Sold Units	540
B	Break Even Units	460
C = A - B	Margin of Safety Units	80
D = C x 14.71]	Margin of Safety	$              1,176.80	Answer

• Requirement 3

A	Target Profits	$              1,900.00
B	Fixed Cost	$              5,147.40
C = A+B	Total Contribution margin required	$              7,047.40
D	Contribution margin per cake	$                    11.19
E = C/D	Target Sales Units	630	Answer