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 1.35 0.45 0.20 $9,000 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 $18,000. 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. 4. Based on the original information, how many sundaes must Izzy sell to generate a profit of $50,000, 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

Breakeven is the point of sales where there is no profit or loss. At this point of sales, the sales contribution are enough to service the fixed costs and variable costs.

Breakeven is computed by dividing fixed costs by contribution per unit.

Sales Price	$5.00
Less: Variable Costs per unit:
Ingredients	($1.35)
Direct labor	($0.45)
Overhead	($0.20)
Contribution margin per unit (a)	$3.00
Fixed Costs (b)	$9,000
Break-even point in units (b / a)	3,000

Breakeven in sales = $ 3000 X 5 = $ 15000