Dina El-Tohamy, a local resident of Cairo, Egypt, has always had a passion for baking.

After graduating with a degree in business administration, she decided to attend several cooking classes to sharpen her natural talent. Then came the next big step:

opening her own business, which she decided to call “Cairo Cookies.” Dina had heard about a local bank offering loans for young entrepreneurs at very low interest rates.

She went online and downloaded the application form. She was required to provide some operational forecasts of the business for the first year.

To keep it simple, Dina decided to produce only two types of cookies during the first year: chocolate chip cookies (CCC) and raisin cookies (RC). Furthermore, she predicted that about 70% of the units sold would be CCC while the remaining 30%

would be RC. She forecasted the following items:

Requirements

 1. How many chocolate chip and raisin cookies should Dina sell during the first year to break even? 

2. If Dina wants to earn an annual operating income of EGP 77,000, how many cookies of each type should be sold?

3. What happens to the total breakeven point if her estimate of total fixed costs is understated by EGP 4,600? 

4. If Dina could use some marketing techniques to alter the sales, would she prefer to sell more of the CCC or of the RC?

Transcribed Image Text:

Selling price per unit Variable cost per unit Total annual fixed costs CCC EGP 8 EGP 6 RC EGP EGP EGP 34,500 10 7