Cove’s Cakes is a local bakery. Price and cost information follows:

Price per cake	$	15.01
Variable cost per cake
Ingredients		2.35
Direct labor		1.06
Overhead (box, etc.)		0.19
Fixed cost per month	$	4,449.90

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 $485 per month.

c. Variable costs decrease by $0.34 per cake.

d. Sales price decreases by $0.80 per cake.

2. Assume that Cove sold 415 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 10 percent increase in sales revenue.

Lindstrom Company produces two fountain pen models. Information about its products follows:

	Product A			Product B
Sales revenue	$	115,000		$	165,000
Less: Variable costs		41,400			52,800
Contribution margin	$	73,600		$	112,200
Total units sold		5,000			5,000

Lindstrom’s fixed costs total $82,500.

Required:

1. Determine Lindstrom’s weighted-average unit contribution margin and weighted-average contribution margin ratio.

2. Calculate Lindstrom’s break-even point in units and in sales revenue.

3. Calculate the number of units that Lindstrom must sell to earn a $110,000 profit.

4. Calculate Lindstrom’s margin of safety and margin of safety as a percentage of sales if it sells 8,800 total pens.