Cove's Cakes is a local bakery. Price and cost information follows:Price per cakeVariable cost per cakeIngredientsDirect labor14.912.271.10Overhead (box, etc.)Fixed cost per month0.29$5,175.00Required: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 $455 per monthc. Variable costs decrease by $0.44 per cake.d. Sales price decreases by $0.60 per cake.2. Assume that Cove sold 480 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 12 percent increase in sales revenue.

Question
Asked Nov 13, 2019
73 views
Cove's Cakes is a local bakery. Price and cost information follows:
Price per cake
Variable cost per cake
Ingredients
Direct labor
14.91
2.27
1.10
Overhead (box, etc.)
Fixed cost per month
0.29
$5,175.00
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 $455 per month
c. Variable costs decrease by $0.44 per cake.
d. Sales price decreases by $0.60 per cake.
2. Assume that Cove sold 480 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 12 percent increase in sales revenue.
help_outline

Image Transcriptionclose

Cove's Cakes is a local bakery. Price and cost information follows: Price per cake Variable cost per cake Ingredients Direct labor 14.91 2.27 1.10 Overhead (box, etc.) Fixed cost per month 0.29 $5,175.00 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 $455 per month c. Variable costs decrease by $0.44 per cake. d. Sales price decreases by $0.60 per cake. 2. Assume that Cove sold 480 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 12 percent increase in sales revenue.

fullscreen
check_circle

Expert Answer

Step 1

Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and specify the other subparts (up to 3) you’d like answered.

Step 2
  1. Following are the calculation of new break-even point:
help_outline

Image Transcriptionclose

Formula for calculating Break-even Point is Fixed Cost Breakeven Point = Contribution Margin per cake a. When sales price increase by $1.80 per cake Particulars Amount Sale Price per cake ($14.91 + $1.80) Less: Variable cost per cake Ingredients Direct Labor Overhead (box, etc.) Contribution Margin per cake $16.71 $2.27 $1.10 $0.29 $3.66 $13.05 Fixed Cost Breakeven Point = Contribution Margin per cake $5,175 $13.05 396.55 or 397 cakes

fullscreen
Step 3

b. When Fixed cost increase b...

help_outline

Image Transcriptionclose

Particulars Amount Sale Price per cake Less: Variable cost per cake Ingredients Direct Labor Overhead (box, etc.) Contribution Margin per cake $14.91 $2.27 $1.10 $0.29 $3.66 $11.25 Fixed Cost Breakeven Point = Contribution Margin per cake $5,175$455 $11.25 = 500.44 Or 500 cakes

fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Accounting

Cost Accounting

Related Accounting Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: Fidicuary Investments paid its employee, Yolanda, wages of $137,000 in 2018. Calcu-late the FICA tax...

A: FICA taxes: FICA is called federal insurance contributions act which consists two types of taxes. Th...

question_answer

Q: Presented below are the components in determining cost of goods sold. Determine the missing amounts....

A: Cost of goods sold:Cost of goods sold is the carrying value of goods sold during a particular period...

question_answer

Q: Accounting Question

A: Calculate the total amount of each item.

question_answer

Q: Required information The Foundational 15 [LO4-1, LO4-2, LO4-3, L04-4, LO4-5] [The following informat...

A: 1. The Finished goods transferred out has been commputed by adding opening WIP and units added to pr...

question_answer

Q: On January 2, 2017, Criswell Acres purchased from Mifflinburg Farm Supply a new tractor that had a c...

A: Click to see the answer

question_answer

Q: Precision Labs has two employees. The following information was taken from its individual earnings r...

A: Payroll:  Payroll refers to the total amount that is required to be paid by the company to its emplo...

question_answer

Q: Q. question 4

A: Prepare entry for reselling the shares.

question_answer

Q: Dividends Per Share Imaging Inc., a developer of radiology equipment, has stock outstanding as follo...

A: Cumulative dividends: This is a preferential right a preferred shareholder must receive current divi...

question_answer

Q: Terry Industries produces two electronic decoders, P and Q. Decoder P is more sophisticated and requ...

A: ABC (Activity based costing) framework was created to manage the drawbacks of customary costing fram...