Answered: Izzy Ice Cream has the following price…

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter7: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 46E: Lotts Company produces and sells one product. The selling price is 10, and the unit variable cost is...

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Question

Izzy Ice Cream has the following price and cost information:


Price per 2-scoop sundae	$	5.00
Variable cost per sundae:
Ingredients		1.35
Direct labor		0.45
Overhead		0.20
Fixed cost per month	$	5,400

Required:

1. Determine Izzy’s break-even point in units and sales dollars.

2. Determine how many sundaes must be sold to generate a profit of $10,800.

3. Calculate Izzy’s new break-even point for each of the following independent scenarios:

a. Sales price decreases by $0.50.

b. Fixed costs decrease by $300 per month.

c. Variable costs increase by $0.50 per sundae.

4. Based on the original information, how many sundaes must Izzy sell to generate a profit of $26,000, if sales price increases by $0.50 and variable costs increase by $0.30?

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