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 $3,300 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 $6,600. 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. 4. Based on the original information, how many sundaes must Izzy sell to generate a profit of $12,000, 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

Izzy Ice Cream Requirement 1 Breakeven point in units = Fixed Cost / Contribution per unit = 3300 / (5 - 1.35 -0.45-0.20) = 3300 / 3 = 1100 units Breakeven point in dollars = Fixed Cost / Contribution margin % = 3300/(3/5) = $5500 Requirement 2 Target Sales = Fixed Cost + Desired Profit / Contribution per unit Target Sales = (3300 + 6600) / 3 Target Sales = 3300 units Requirement 3 a.Sales price decrease by $0.50 Breakeven point in units = Fixed Cost / Contribution per unit = 3300 / (4.50 - 1.35 -0.45-0.20) = 3300 / 2.5 = 1320 units Breakeven point in dollars = Fixed Cost / Contribution margin % = 3300/(2.5 / 4.5) = $5940

Izzy Ice Cream Requirement 1 Breakeven point in units = Fixed Cost / Contribution per unit = 3300 / (5 - 1.35 -0.45-0.20) = 3300 / 3 = 1100 units Breakeven point in dollars = Fixed Cost / Contribution margin % = 3300/(3/5) = $5500 Requirement 2 Target Sales = Fixed Cost + Desired Profit / Contribution per unit Target Sales = (3300 + 6600) / 3 Target Sales = 3300 units Requirement 3 a.Sales price decrease by $0.50 Breakeven point in units = Fixed Cost / Contribution per unit = 3300 / (4.50 - 1.35 -0.45-0.20) = 3300 / 2.5 = 1320 units Breakeven point in dollars = Fixed Cost / Contribution margin % = 3300/(2.5 / 4.5) = $5940