Question

Izzy Ice Cream has the following price and cost information:

Price per 2-scoop sundae	$	5.00
Variable cost per sundae:
Ingredients		1.35
Direct labor		0.45
Overhead		0.20
Fixed cost per month	$	8,100

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 $16,200.

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 $44,000, if sales price increases by $0.50 and variable costs increase by $0.30?

• Required 1

Determine Izzy’s break-even point in units and sales dollars.

	Break-even units sundaes Break-even sales

Determine how many sundaes must be sold to generate a profit of $16,200.

	Target sales sundaes

Calculate Izzy’s new break-even point for each of the following independent scenarios: (Do not round your intermediate calculations.)

a. Sales price decreases by $0.50.
b. Fixed costs decrease by $300 per month.
c. Variable costs increase by $0.50 per sundae.

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	Break-Even Point 3a. Sales price decreases by $0.50 sundaes 3b. Fixed costs decrease by $300 per month sundaes 3c. Variable costs increase by $0.50 per sundae sundaes

Based on the original information, how many sundaes must Izzy sell to generate a profit of $44,000, if sales price increases by $0.50 and variable costs increase by $0.30? (Round your intermediate calculations to 2 decimal places and final answer to the nearest whole number.)

	Break-even units sundaes

Answer 1

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