Question

In: Accounting

Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.71...

Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.71 Variable cost per cake Ingredients 2.22 Direct labor 1.10 Overhead (box, etc.) 0.21 Fixed cost per month $ 4,024.80

Required: 1. Calculate Cove’s new break-even point under each of the following independent scenarios: (Round your answer to the nearest whole number.)

a. Sales price increases by $1.80 per cake.

Break-Even Point cakes


b. Fixed costs increase by $480 per month.

Break-Even Point cakes

c. Variable costs decrease by $0.43 per cake.

Break-Even Point cakes


d. Sales price decreases by $0.40 per cake.

Break-Even Point cakes

2. Assume that Cove sold 380 cakes last month. Calculate the company’s degree of operating leverage. (Do not round intermediate calculations. Round your answer to 4 decimal places.)

Degree of Operating Leverage

3. Using the degree of operating leverage calculated in Requirement 2, calculate the change in profit caused by a 11 percent increase in sales revenue. (Round your final answer to 2 decimal places (i.e. .1234 should be entered as 12.34%.))

Effect on Profit %

Solutions

Expert Solution

price per cake 14.71
Variable cost per cake
ingredients 2.22
Direct labor 1.1
overhead 0.21 3.53
Contribution margin per cake 11.18
Break even point(units) = fixed cost/contribution margin per unit
1a) when sale increases by $1.80 per cake
contribution will also increase by the same amount
4024.80/(11.18+1.8)
BEP 310 Cakes answer
b) fixed cost increase by 480per month
(4024.8+480)/11.18
403
BEP 403 Cakes answer
c) Variable cost decrease by 0.43 per caje
leading to increase in contribution
(4024.8)/(11.18+.43)
347
BEP 347 Cakes answer
d) when sale decreases by $.40 per cake
contribution will also decrease by the same amount
4024.8/(11.18-.40)
BEP 373 Cakes answer
2) contibution (380*11.18)= 4248.4
less fixed cost -4024.8
net income 223.6
degree of operating leverage = contribution/net income
4248.4/223.6
19.0000
3) Effect on profit = increase of sales revenue *degree of operating leverage
11%*19
209 %
Effect on profit 209%

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.21...
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.21 Variable cost per cake Ingredients 2.18 Direct labor 1.16 Overhead (box, etc.) 0.28 Fixed cost per month $ 4,130.10 Required: 1. Calculate Cove’s new break-even point under each of the following independent scenarios: a. Sales price increases by $1.70 per cake. b. Fixed costs increase by $460 per month. c. Variable costs decrease by $0.44 per cake. d. Sales price decreases by $0.20 per...
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 13.71...
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 13.71 Variable cost per cake Ingredients 2.16 Direct labor 1.15 Overhead (box, etc.) 0.15 Fixed cost per month $ 4,715.00 Required: 1. Calculate Cove’s new break-even point under each of the following independent scenarios: a. Sales price increases by $1.80 per cake. b. Fixed costs increase by $530 per month. c. Variable costs decrease by $0.34 per cake. d. Sales price decreases by $0.60 per...
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.81...
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.81 Variable cost per cake Ingredients 2.34 Direct labor 1.03 Overhead (box, etc.) 0.21 Fixed cost per month $ 4,042.80 Required: 1. Calculate Cove’s new break-even point under each of the following independent scenarios: (Round your answer to the nearest whole number.) a. Sales price increases by $1.90 per cake. b. Fixed costs increase by $525 per month. c. Variable costs decrease by $0.35 per...
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.11...
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.11 Variable cost per cake Ingredients 2.35 Direct labor 1.05 Overhead (box, etc.) 0.18 Fixed cost per month $ 4,212.00 Required: 1. Calculate Cove’s new break-even point under each of the following independent scenarios: (Round your answer to the nearest whole number.) a. Sales price increases by $1.50 per cake. b. Fixed costs increase by $460 per month. c. Variable costs decrease by $0.43 per...
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.01...
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.01 Variable cost per cake Ingredients 2.33 Direct labor 1.19 Overhead (box, etc.) 0.11 Fixed cost per month $ 3,010.20 Required: 1. Calculate Cove’s new break-even point under each of the following independent scenarios: (Round your answer to the nearest whole number.) a. Sales price increases by $1.50 per cake. Break Even Point _______ Cakes b. Fixed costs increase by $485 per month. Break Even...
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.71...
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.71 Variable cost per cake Ingredients 2.31 Direct labor 1.01 Overhead (box, etc.) 0.13 Fixed cost per month $ 4,278.80 Required: 1. Calculate Cove’s new break-even point under each of the following independent scenarios: a. Sales price increases by $1.60 per cake. b. Fixed costs increase by $545 per month. c. Variable costs decrease by $0.42 per cake. d. Sales price decreases by $0.60 per...
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.61...
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.61 Variable cost per cake Ingredients 2.22 Direct labor 1.15 Overhead (box, etc.) 0.27 Fixed cost per month $ 3,291.00 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 370 cakes per month. 3. Determine the number of cakes that Cove must sell to generate $1,900 in profit.
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.01...
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.01 Variable cost per cake Ingredients 2.19 Direct labor 1.12 Overhead (box, etc.) 0.29 Fixed cost per month $ 3,955.80 Required: 1. Calculate Cove’s new break-even point under each of the following independent scenarios: (Round your answer to the nearest whole number.) a. Sales price increases by $1.10 per cake. b. Fixed costs increase by $450 per month. c. Variable costs decrease by $0.44 per...
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.61...
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.61 Variable cost per cake Ingredients 2.15 Direct labor 1.01 Overhead (box, etc.) 0.16 Fixed cost per month $ 3,274.10 Required: 1. Calculate Cove’s new break-even point under each of the following independent scenarios: a. Sales price increases by $1.60 per cake. b. Fixed costs increase by $465 per month. c. Variable costs decrease by $0.30 per cake. d. Sales price decreases by $0.70 per...
Cory’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 17.00...
Cory’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 17.00 Variable cost per cake Ingredients 2.50 Direct labor 1.40 Overhead (box, etc.) 0.20 Fixed cost per month $ 3,850.00 Required: Determine Cory’s break-even point in units and sales dollars. Determine the bakery’s margin of safety if it currently sells 450 cakes per month. Determine the number of cakes that Cory must sell to generate $2,000 in profit.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT