Required: 1. Calculate Cove's new break-even point under each of the following independent scenarios. a. Sales price increases by $1.50 per cake. b. Fixed costs increase by $465 per month. c. Variable costs decrease by $0.45 per cake. d. Sales price decreases by $0.50 per cake. 2. Assume that Cove sold 345 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.
Required: 1. Calculate Cove's new break-even point under each of the following independent scenarios. a. Sales price increases by $1.50 per cake. b. Fixed costs increase by $465 per month. c. Variable costs decrease by $0.45 per cake. d. Sales price decreases by $0.50 per cake. 2. Assume that Cove sold 345 cakes last month. Calculate the company's degree of operating leverage. 3. Using the degree of operating leverage. calculate the change in profit caused by a 15 percent increase in sales revenue.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:### Cove's Cakes: Break-Even Analysis
#### Cost Information
Cove's Cakes is a local bakery, and the following table presents the price and cost details:
| | Amount ($) |
|----------------------------------|-----------------|
| **Price per cake** | 13.71 |
| **Variable cost per cake** | |
| Ingredients | 2.15 |
| Direct labor | 1.19 |
| Overhead (box, etc.) | 0.18 |
| **Fixed cost per month** | 3,260.80 |
#### Required Tasks
1. **Calculate Cove's new break-even point under each of the following independent scenarios:**
a. Sales price increases by $1.50 per cake.
b. Fixed costs increase by $465 per month.
c. Variable costs decrease by $0.45 per cake.
d. Sales price decreases by $0.50 per cake.
2. **Assume that Cove sold 345 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.**
Please **complete this question by entering your answers in the tabs below.**
#### Tab Instructions
- **Required 1**: Calculate Cove’s new break-even point under each of the following independent scenarios. (Round your answers to the nearest whole number.)
a. Sales price increases by $1.50 per cake.
b. Fixed costs increase by $465 per month.
c. Variable costs decrease by $0.45 per cake.
d. Sales price decreases by $0.50 per cake.
![**Homework Problems on Cost-Volume-Profit Analysis**
---
1. **Assume that Cove sold 345 cakes last month. Calculate the company’s degree of operating leverage.**
2. **Using the degree of operating leverage, calculate the change in profit caused by a 15 percent increase in sales revenue.**
---
**Complete this question by entering your answers in the tabs below.**
---
**Required 1** | **Required 2** | **Required 3**
---
**Required 1**: Calculate Cove's new break-even point under each of the following independent scenarios. (Round your answers to the nearest whole number.)
a. Sales price increases by $1.50 per cake.
b. Fixed costs increase by $465 per month.
c. Variable costs decrease by $0.45 per cake.
d. Sales price decreases by $0.50 per cake.
---
### Break-Even Point Table:
| Scenario | Break-Even Point |
|-----------------------------------------------------|------------------|
| **1a. Sales price increases by $1.50 per cake** | ________ cakes |
| **1b. Fixed costs increase by $465 per month** | ________ cakes |
| **1c. Variable costs decrease by $0.45 per cake** | ________ cakes |
| **1d. Sales price decreases by $0.50 per cake** | ________ cakes |
---
Buttons:
- **Required 2 ➔**
- **Prev** | **2 of 10** | **Next**
---
Explanation of Graph/Diagram:
- There is a table for documenting the break-even point under different financial scenarios related to sales price, fixed costs, and variable costs.
- Each row represents a different scenario with an empty cell for entering the calculated break-even point in cakes.
**Note:** The values for each scenario are to be calculated based on the provided changes in prices and costs, keeping in mind the basic formula for the break-even point:
\[ \text{Break-Even Point (units)} = \frac{\text{Fixed Costs}}{\text{Price per Unit} - \text{Variable Cost per Unit}} \]
Instructors may provide sample values or guide students through calculation steps as necessary.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fd2449da7-59c0-41ca-aea4-623488ef2437%2F368bf892-31cb-4dad-9a91-e457d3ccdf00%2Fwpwxdwl_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Homework Problems on Cost-Volume-Profit Analysis**
---
1. **Assume that Cove sold 345 cakes last month. Calculate the company’s degree of operating leverage.**
2. **Using the degree of operating leverage, calculate the change in profit caused by a 15 percent increase in sales revenue.**
---
**Complete this question by entering your answers in the tabs below.**
---
**Required 1** | **Required 2** | **Required 3**
---
**Required 1**: Calculate Cove's new break-even point under each of the following independent scenarios. (Round your answers to the nearest whole number.)
a. Sales price increases by $1.50 per cake.
b. Fixed costs increase by $465 per month.
c. Variable costs decrease by $0.45 per cake.
d. Sales price decreases by $0.50 per cake.
---
### Break-Even Point Table:
| Scenario | Break-Even Point |
|-----------------------------------------------------|------------------|
| **1a. Sales price increases by $1.50 per cake** | ________ cakes |
| **1b. Fixed costs increase by $465 per month** | ________ cakes |
| **1c. Variable costs decrease by $0.45 per cake** | ________ cakes |
| **1d. Sales price decreases by $0.50 per cake** | ________ cakes |
---
Buttons:
- **Required 2 ➔**
- **Prev** | **2 of 10** | **Next**
---
Explanation of Graph/Diagram:
- There is a table for documenting the break-even point under different financial scenarios related to sales price, fixed costs, and variable costs.
- Each row represents a different scenario with an empty cell for entering the calculated break-even point in cakes.
**Note:** The values for each scenario are to be calculated based on the provided changes in prices and costs, keeping in mind the basic formula for the break-even point:
\[ \text{Break-Even Point (units)} = \frac{\text{Fixed Costs}}{\text{Price per Unit} - \text{Variable Cost per Unit}} \]
Instructors may provide sample values or guide students through calculation steps as necessary.
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