Price per cake $13.31 Variable cost per cake ingredients 2.24$ direct labor 1.01$ overhead 0.23$ Fixed...

Price per cake	$13.31
Variable cost per cake
ingredients	2.24$
direct labor	1.01$
overhead	0.23$
Fixed cost per month	3,342.20$

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

2. Determine the bakery’s margin of safety if it currently sells 380 cakes per month.

3. Determine the number of cakes that Cove must sell to generate $1,800 in profit.

Expert Solution

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Price per cake		$ 13.31
Variable cost per cake:
ingredients	$ 2.24
direct labor	$ 1.01
overhead	$ 0.23	$ 3.48
Contribution margin		$ 9.83
Contribution margin Ratio	$9.83/$13.31	73.85%

Fixed cost per month		$ 3,342.20

Part 1

BEP in units	$3,342.20/$9.83	340	Units
BEP in Sales dollars	$3,342.20/73.85%	$ 4,525

Part 2

Break even sales		$ 4,525
Sales at 380 units	380*$13.31	$ 5,058
Margin of safety	$5,058-$4,525	$ 532

Part 3

No of cakes	($3,342.20+$1,800)/$9.83	523	Units

ekkarill92 answered 1 year ago

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