ove's Cakes is a local bakery. Price and cost information follows: Price per cake $ 17.00 Variable cost per cake Ingredients 2.50 Direct labor 1.40 Overhead (box, etc.) 0.20 Fixed costs per month 3,850.00 Required: Calculate Cove's new break-even point under each of the following independent scenarios: Sales price increases by $1.00 per cake. Fixed costs increase by $500 per month. Variable costs decrease by $0.35 per cake. Sales price decreases by $0.50 per cake. Assume that Cove sold 400 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 10 percent increase in sales revenue.
ove's Cakes is a local bakery. Price and cost information follows: Price per cake $ 17.00 Variable cost per cake Ingredients 2.50 Direct labor 1.40 Overhead (box, etc.) 0.20 Fixed costs per month 3,850.00 Required: Calculate Cove's new break-even point under each of the following independent scenarios: Sales price increases by $1.00 per cake. Fixed costs increase by $500 per month. Variable costs decrease by $0.35 per cake. Sales price decreases by $0.50 per cake. Assume that Cove sold 400 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 10 percent increase in sales revenue.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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sanju
Transcribed Image Text:ove's Cakes is a local bakery. Price and cost information follows: Price per cake $ 17.00 Variable cost per cake Ingredients 2.50
Direct labor 1.40 Overhead (box, etc.) 0.20 Fixed costs per month 3,850.00 Required: Calculate Cove's new break-even point
under each of the following independent scenarios: Sales price increases by $1.00 per cake. Fixed costs increase by $500 per
month. Variable costs decrease by $0.35 per cake. Sales price decreases by $0.50 per cake. Assume that Cove sold 400 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 10 percent increase in sales revenue.
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