Question

Cove's Cakes is a local bakery. Price and cost information follows: $ 13.21 Price per cake Variable cost per cake Ingredients Direct labor Overhead (box, etc.) Fixed cost per month $3,470.40 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 420 cakes per month 3. Determine the number of cakes that Cove must sell to generate $2,300 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.) I Cakes Break-Even Units Break-Even Sales Dollars Required 2 >

Answer 1

Answers

• Working

A	Price per cake	$                    13.21
	Variable costs per cake:
	Ingrediants	$                       2.16
	Direct Labor	$                       1.18
	Overheads	$                       0.23
B	Total Variable cost per cake	$                       3.57
C = A - B	Contribution margin per cake	$                       9.64

• [1]

A	Fixed cost per month	$              3,470.40
B	Contribution margin per cake	$                       9.64
C = A/B	Break Even Units	360	Answer
D	Price per cake	$                    13.21
E = C x D	Break Even Sales Dollars	$              4,755.60	Answer

• [2]

A	Cakes sold	420
B	Break Even no. of cakes	360
C = A - B	Margin of Safety	60	Answer

• [3]

A	Target Profits	$              2,300.00
B	Fixed cost per month	$              3,470.40
C = A+B	Total Contribution margin required	$              5,770.40
D	Contribution margin per cake	$                       9.64
E = C/D	No. of cakes to sell to generate profit	599	Answer