Question: Coves Cakes is a local bakery. Price and cost information follows: Price per cake ....... $17.00 Variable cost per cake Ingredients ........ 2.50 Direct labor

Cove’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 cost per month ....$3,850.00


Required:

1. Determine Cove’s break-even point in units and sales dollars.

2. Determine the bakery’s margin of safety if it currently sells 450 cakes per month.

3. Determine the number of cakes that Cove must sell to generate $2,000 in profit.


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