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

Price per cake$13.11

Variable cost per cake:

Ingredients2.23

Direct labor1.13

Overhead (box, etc.)0.22

Fixed cost per month $2,763.70

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 350 cakes per month.

3.Determine the number of cakes that Cove must sell to generate $1,600 in profit.

4.Calculate Cove's new break-even point under each of the following independent scenarios:

a.Sales price increases by $1.80 per cake.

b.Fixed costs increase by $530 per month.

c.Variable costs decrease by $0.29 per cake.

d.Sales price decreases by $0.50 per cake.

5.Assume that Cove sold 440 cakes last month. Calculate the company's degree of operating leverage.

6.Using the degree of operating leverage, calculate the change in profit caused by a 10 percent increase in sales revenue.

Sandy Bank, Inc., makes one model of wooden canoe. and, the information for it follows:

Number of canoes produced and sold400|600|750

Total costs

Variable costs $50,000 | $75,000 | $93,750

Fixed costs $90,000| $90,000 | $90,000

Total costs $140,000 |$165,000 | $183,750

Cost per unit

Variable cost per unit $125.00 | $125.00 | $125.00

Fixed cost per unit 225.00 | 150.00| 120.00

Total cost per unit | $350.00 | $275.00 | $245.00

Sandy Bank sells its canoes for $375 each.

Required:

1.Suppose that Sandy Bank raises its selling price to $500 per canoe. Calculate its new break-even point in units and in sales dollars.

2.If Sandy Bank sells 670 canoes, compute its margin of safety in units and as a percentage of sales. (Use the new sales price of $500.)

3.Calculate the number of canoes that Sandy Bank must sell at $500 each to generate $100,000 profit.

Izzy Ice Cream has the following price and cost information:

Price per 2-scoop sundae $5.00

Variable cost per sundae:

Ingredients1.35

Direct labor0.45

Overhead0.20

Fixed cost per month $7,500

Required:

1.Determine Izzy's break-even point in units and sales dollars.

2. Determine how many sundaes must be sold to generate a profit of $15,000.

3.Calculate Izzy's new break-even point for each of the following independent scenarios:

a.Sales price decreases by $0.50.

b.Fixed costs decrease by $300 per month.

c.Variable costs increase by $0.50 per sundae.

4.Based on the original information, how many sundaes must Izzy sell to generate a profit of $40,000, if sales price increases by $0.50 and variable costs increase by $0.30?