Question
In: Accounting
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
cake.
d. Sales price decreases by $0.50 per
cake.
2. Assume that Cove sold 400 cakes last month.
Calculate the company’s degree of operating leverage. (Do
not round intermediate calculations. Round your answer to 2 decimal
places.)
3. Using the degree of operating leverage
calculated in Requirement 2, calculate the change in profit caused
by a 5 percent increase in sales revenue. (Round your final
answer to 2 decimal places (i.e. .1234 should be entered as
12.34%.))
Solutions
Expert Solution
| 1a) Calculation of Break Even Point | |
| Sale Price Per unit | 15.11 |
| Variable Cost per unit | 3.60 |
| Contribution per unit | 11.51 |
| Contribution Ratio | 76.17% |
| Fixed Cost | 3955.8 |
| Break even point in dollar sales | 5193 |
| (Fixed Cost / Contribution Ratio) | |
| 1b) Calculation of Break Even Point | |
| Sale Price Per unit | 14.01 |
| Variable Cost per unit | 3.60 |
| Contribution per unit | 10.41 |
| Contribution Ratio | 74.30% |
| Fixed Cost | 4405.8 |
| Break even point in dollar sales | 5929 |
| (Fixed Cost / Contribution Ratio) | |
| 1c) Calculation of Break Even Point | |
| Sale Price Per unit | 14.01 |
| Variable Cost per unit | 3.16 |
| Contribution per unit | 10.85 |
| Contribution Ratio | 77.44% |
| Fixed Cost | 3955.8 |
| Break even point in dollar sales | 5108 |
| (Fixed Cost / Contribution Ratio) | |
| 1d) Calculation of Break Even Point | |
| Sale Price Per unit | 13.51 |
| Variable Cost per unit | 3.60 |
| Contribution per unit | 9.91 |
| Contribution Ratio | 73.35% |
| Fixed Cost | 3955.8 |
| Break even point in dollar sales | 5393 |
| 2. Degree of operating leverage = | |
| Contribution / Net Operating Income | |
| Contribution | 4164 |
| Net Operating Income | 208 |
| Thus, operating Leverage | 20 |
| Sales for 400 Units | 5604 |
| Variable Costs | 1440 |
| Contribution | 4164 |
| Fixed Cost | 3955.8 |
| Net Operating Income | 208 |
| 3. Net Operating income will increase by = 20*5% = 100% |
ekkarill92 answered 1 year agoRelated 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
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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
2.22 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....
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 $ 14.61...
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.
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