E6-4 Analyzing Changes in Price, Cost Structure, Degree of Operating Leverage [LO 6-4, 6-5] Cove's...
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E6-4 Analyzing Changes in Price, Cost Structure, Degree of Operating Leverage [LO 6-4, 6-5] Cove's Cakes is a local bakery. Price and cost information follows: $ 14.71 Price per cake Variable cost per cake Ingredients Direct labor Overhead (box, etc.) Fixed cost per month 2.24 1.14 0.16 $4,914.80 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 $2.10 per cake. Break-Even Point cakes b. Fixed costs increase by $480 per month Break-Even Point - cakes ] c. Variable costs decrease by $0.42 per cake. Break-Even Point cakes d. Sales price decreases by $0.30 per cake. Break-Even Point cakes 2. Assume that Cove sold 455 cakes last month. Calculate the company's degree of operating leverage. (Do not round intermediate calculations. Round your answer to 2 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 6 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
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