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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...

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Accounting

Cove’s Cakes is a local bakery. Price and cost informationfollows:

Price per cake$14.61
Variable cost per cake
Ingredients2.15
Direct labor1.01
Overhead (box, etc.)0.16
Fixed cost per month$3,274.10

Required:

1. Calculate Cove’s new break-even point undereach 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 percake.

d. Sales price decreases by $0.70 per cake.

2. Assume that Cove sold 310 cakes last month.Calculate the company’s degree of operating leverage.

3. Using the degree of operating leverage,calculate the change in profit caused by a 9 percent increase insales revenue.

Answer & Explanation Solved by verified expert
4.4 Ratings (772 Votes)
All working forms part of the answer Requirement 1 A Price per cake 1621 B Total variable cost per cake 332 C A B Contribution margin per cake 1289 D Fixed Cost 327410 E DC Break Even point 254 Answer a A    See Answer
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