Question

Izzy Ice Cream has the following price and cost information: $ 5.00 Price per 2-scoop sundae Variable cost per sundae: Ingredients Direct labor Overhead Fixed cost per month points 1.35 0.45 0.20 $7,800 Skipped eBook Print Required: 1. Determine Izzy's break-even point in units and sales dollars. 2. Determine how many sundaes must be sold to generate a profit of $15,600. 3. Calculate Izzy's new break-even point for each of the following independent scenarios: a. Sales price decreases by $0.50. b. Fixed costs decrease by $300 per month. c. Variable costs increase by $0.50 per sundae. References 4. Based on the original information, how many sundaes must Izzy sell to generate a profit of $42,000, if sales price increases by $0.50 and variable costs increase by $0.30? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Determine Izzy's break-even point in units and sales dollars. sundaes Break-even units Break-even sales

Answer 1

Part 1
	Sales Price per unit		$               5.00
	Variable cost per unit:
	Ingredients	$             1.35
	Direct labor	$             0.45
	Overhead	$             0.20	$               2.00
	Contribution margin per unit		$               3.00
	Contribution margin ratio($3.00/$5.00)		60%
	Break-even unit($7,800/$3.00)		2600	units
	Break-even Sales($7,800/60%)		$           13,000
Part 2
	Target Profit	$         15,600
	Add:Fixed Costs	$           7,800
	Target Contribution	$         23,400
	Contribution margin ratio	60%
	Target Sales($23,400/60%)	$         39,000
Part 3
3.a	Sales Price per unit		$               4.50
	Variable cost per unit:
	Ingredients	$             1.35
	Direct labor	$             0.45
	Overhead	$             0.20	$               2.00
	Contribution margin per unit		$               2.50
	Break-even unit($7,800/$2.50)		3120	units
3.b	Sales Price per unit		$               5.00
	Variable cost per unit:
	Ingredients	$             1.35
	Direct labor	$             0.45
	Overhead	$             0.20	$               2.00
	Contribution margin per unit		$               3.00
	Break-even unit($7,500/$3.00)		2500	units
3.c	Sales Price per unit		$               5.00
	Variable cost per unit:
	Ingredients	$             1.35
	Direct labor	$             0.45
	Overhead	$             0.20
	Increase on overhead	$             0.50	$               2.50
	Contribution margin per unit		$               2.50
	Break-even unit($7,800/$2.50)		3120	units
Part 4	Target Profit	$         42,000
	Add:Fixed Costs	$           7,800
	Target Contribution	$         49,800
	Sales Price per unit	$             5.50
	Less:Variablle cost per unit($2.00+$0.30)	$             2.30
	Contribution margin per unit	$             3.20
	Contribution margin ratio($3.20/$5.50)	58.18%
	So Break-even units($7,800/58.18%)	13406	units