Question

Check my work 2 Cove's Cakes is a local bakery. Price and cost Information follows: 1 13.71 points Price per cake Variable cost per cake Ingredients Direct labor Overhead (box, etc.) Fixed cost per month Skipped 2.34 1.02 0.17 $3,359.40 eBook 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 $1,800 in profit. References 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.) Cakes Break-Even Units Break-Even Sales Dollars < Required 1 Required 2 >

Answer 1

1.

Selling price per unit = $13.71

Variable cost per unit = $3.53

Contribution margin per unit = Selling price per unit – Variable cost per unit

= 13.71 - 3.53

= $10.18

Contribution margin ratio = Contribution margin per unit/Selling price per unit

= 10.18/13.71

= 74.25%

Break even point (units) = Fixed cost/Contribution margin per unit

= 3,359.40/10.18

= 330 cakes

Break even sales in dollars = Fixed cost/Contribution margin ratio

= 3,359.40/74.25%

= $4,524

2.

Present sales = Number of units sold x Selling price per unit

= 420 x 13.71

= $5,758

Margin of safety in dollar sales = Present sales - Breakeven sales

= 5,758 - 4,524

= $1,234

3.

Units to be sold to get a target profit = (Fixed cost + Target profit)/Contribution margin per unit

= (3,359.40 + 1,800)/10.18

= 5,159.4/10.18

= 507 cakes