Problem 2 Cove’s Cakes is a local bakery. Price and cost information follows: see image Required: 2. Assume that Cove sold 465 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 15 percent increase in sales revenue

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Problem 2
Cove’s Cakes is a local bakery. Price and cost information follows:

see image


Required:
2. Assume that Cove sold 465 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 15 percent increase in sales revenue

Price per cake
Variable cost per cake
Ingredients
Direct labor
14.11
2.28
1.15
Overhead (box, etc.)
Fixed cost per month
0.20
$4,611.20
24
Transcribed Image Text:Price per cake Variable cost per cake Ingredients Direct labor 14.11 2.28 1.15 Overhead (box, etc.) Fixed cost per month 0.20 $4,611.20 24
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