ove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.91 Variable cost per cake Ingredients 2.28 Direct labor 1.10 Overhead (box, etc.) 0.27 Fixed costs per month 3,828.40 Required: 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.
ove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.91 Variable cost per cake Ingredients 2.28 Direct labor 1.10 Overhead (box, etc.) 0.27 Fixed costs per month 3,828.40 Required: 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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Cove’s Cakes is a local bakery. Price and cost information follows:
| Price per cake | $ 14.91 |
|---|---|
| Variable cost per cake | |
| Ingredients | 2.28 |
| Direct labor | 1.10 |
| 0.27 | |
| Fixed costs per month | 3,828.40 |
Required:
- 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.
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