Question

Chapter 6 Assignment Saved Izzy Ice Cream has the following price and cost information: $ 5.00 points Price per 2-scoop sundae Variable cost per sundae: Ingredients Direct labor Overhead Fixed cost per month 1.35 0.45 0.20 $6,000 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 $12,000. 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 $30,000, 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 Required 1 Required 2 >

Answer 1

Particulars Amount (S) Selling price per sundae (A) 5.00 Variable cost per sundae: Ingredients 1.35 Direct labour 0.45 Overhead 0.20 Total Variable Overhead per sundae (B) 2.00 Contribution per sundae 3.00 Fixed costs per month = $6,000 Fixed Costs 1.Break-even point in units = – Contribution per unit $6,000 = 2.000 units $3 1.Break-even point in dollars = Sales price per unit x Break-even point in units = $5 x 2,000 = $10,000

2. Let Y be the no. of sundaes required to make a profit of $12,000 Profit = (Contribution per sundae x No. of sundaes) - Fixed cost per month $12,000 = ($3 x Y) - $6,000 $18,000 = $3 x Y Y=6,000 sundaes.

3.a.Sales price decreases by $0.5 New Sales price = $4.5 Particulars Amount (S) Selling price per sundae (A) 4.50 Variable cost per sundae (B) 2.00 Contribution per sundae 2.50 Fixed costs per month = $6,000 Fixed Costs _$6,000 Break-even point in units =- 00 = 2,400 units Contribution per unit $2.50 Break-even point in dollars = Sales price per unit x Break-even point in units = $4.5 x 2,400 = $10,800

13.b.Fixed costs decreases by $300p.m New fixed cost = $5,700 Particulars Amount (S) Selling price per sundae (A) 5.00 Variable cost per sundae (B) 2.00 Contribution per sundae 3.00 - - $5,700 Fixed costs per month = $5,700 Fixed Costs Break-even point in units == °= 1,900 units Contribution per unit $3.00 Break-even point in dollars = Sales price per unit x Break-even point in units = $5.00 x 1,900 = $9,500

3.c.Variable costs increases by $0.50 New variable cost = $2.50 Particulars Amount (S) | Selling price per sundae (A) 5.00 Variable cost per sundae (B) 2.50 Contribution per sundae 2.50 $6,000 = 2.400 units Fixed costs per month = $6,000 Fixed Costs Break-even point in units =- Contribution per unit $2.50 Break-even point in dollars = Sales price per unit x Break-even point in units = $5.00 x 2,400 = $12,000

4.Sales price increases by $0.50 New Sales price = $5.50 Variable costs increases by $0.30 New variable cost = $2.30 Particulars Amount (S) Selling price per sundae (A) 5.50 Variable cost per sundae (B) 2.30 Contribution per sundae 3.20 Fixed costs per month = $6,000 Let Y be the no. of sundaes required to make a profit of $30,000 Profit = (Contribution per sundae x No. of sundaes) - Fixed cost per month $30,000 = ($3.2 x Y) - $6,000 $36,000 = $3.2 x Y Y= 11,250 sundaes.