Question

Cove's Cakes is a local bakery. Price and cost information follows: $ 17.00 points Price per cake Variable cost per cake Ingredients Direct labor Overhead (box, etc.) Fixed cost per month Skipped 2.50 1.40 0.20 $3,850.00 Print Required: 1. Calculate Cove's new break-even point under each of the following independent scenarios: a. Sales price increases by $1.00 per cake. b. Fixed costs increase by $500 per month. c. Variable costs decrease by $0.35 per cake. d. Sales price decreases by $0.50 per cake. References 2. Assume that Cove sold 400 cakes last month. Calculate the company's degree of operating leverage. 3. Using the degree of operating leverage, calculate the change in profit caused by a 10 percent increase in sales revenue. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Calculate Cove's new break-even point under each of the following independent scenarios: (Round your answers to the nearest whole number.) a. Sales price increases by $1.00 per cake. b. Fixed costs increase by $500 per month. c. Variable costs decrease by $0.35 per cake. d. Sales price decreases by $0.50 per cake. Show less 1a. Sales price increases by $1.00 per cake 1b. Fixed costs increase by $500 per month 1c. Variable costs decrease by $0.35 per cake 10. Sales price decreases by $0.50 per cake Break-Even Point cakes cakes cakes cakes Required 1 Required 2 >

Answer 1

Answers

• [1]

A	Price per cake	$                    18.00
B	Total variable cost per cake	$                       4.10
C = A - B	Contribution margin per cake	$                    13.90
D	Fixed Cost	$              3,850.00
E = D/C	Break Even point	277	Answer [a]
A	Price per cake	$                    17.00
B	Total variable cost per cake	$                       4.10
C = A - B	Contribution margin per cake	$                    12.90
D	Fixed Cost	$              4,350.00
E = D/C	Break Even point	337	Answer [b]
A	Price per cake	$                    17.00
B	Total variable cost per cake	$                       3.75
C = A - B	Contribution margin per cake	$                    13.25
D	Fixed Cost	$              3,850.00
E = D/C	Break Even point	291	Answer [c]
A	Price per cake	$                    16.50
B	Total variable cost per cake	$                       4.10
C = A - B	Contribution margin per cake	$                    12.40
D	Fixed Cost	$              3,850.00
E = D/C	Break Even point	310	Answer [d]

• [2]

A	Price per cake	$                    17.00
B	Total variable cost per cake	$                       4.10
C = A - B	Contribution margin per cake	$                    12.90
D	Total cakes sold	400
E = C x D	Total Contribution margin	$              5,160.00
F	Fixed Cost	$              3,850.00
G = E - F	Net Income	$              1,310.00
H = E/G	Degree of Operating Leverage	3.94	Answer

• [3]

A	Change in Sales Revenue	10%
B	Degree of Operating Leverage	3.938931298
C = A x B	Effect on Profits	39.39% or 39.40%	Answer