Cove’s Cakes is a local bakery. Price and cost information follows:Price per cake$ 14.91Variable cost per cake Ingredients2.28Direct labor1.10Overhead (box, etc.)0.27Fixed costs per month3,828.40Required:Calculate Cove’s new break-even point under each of the following independent scenarios:Sales price increases by $1.80 per cake.Fixed costs increase by $450 per month.Variable costs decrease by $0.33 per cake.Sales price decreases by $0.30 per cake.Assume that Cove sold 350 cakes last month. Calculate the company’s degree of operating leverage.Using the degree of operating leverage, calculate the change in profit caused by a 9 percent increase in sales revenue.

Cost volume profit analysis is the technique used by management for decision-making. The methods…

Answered: ove’s Cakes is a local bakery. Price…

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter16: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 2CE

Calculate Cove’s new break-even point under each of the following independent scenarios:
1. Sales price increases by $1.80 per cake.
2. Fixed costs increase by $450 per month.
3. Variable costs decrease by $0.33 per cake.
4. Sales price decreases by $0.30 per cake.
Assume that Cove sold 350 cakes last month. Calculate the company’s degree of operating leverage.
Using the degree of operating leverage, calculate the change in profit caused by a 9 percent increase in sales revenue.

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