Coves Cakes is a local bakery. Price and cost information follows:

Price per cake	$	13.51
Variable cost per cake
Ingredients		2.22
Direct labor		1.16
Overhead (box, etc.)		0.16
Fixed cost per month	$	4,586.20

1. Calculate Coves new break-even point under each of the following independent scenarios:

a. Sales price increases by $1.90 per cake.

b. Fixed costs increase by $550 per month.

c. Variable costs decrease by $0.25 per cake.

d. Sales price decreases by $0.60 per cake.

2. Assume that Cove sold 480 cakes last month. Calculate the companys degree of operating leverage.

3. Using the degree of operating leverage, calculate the change in profit caused by a 14 percent increase in sales revenue.

1.

		Break-Even Point
1a.	Sales price increases by $1.90 per cake		cakes
1b.	Fixed costs increased by $550 per month		cakes
1c.	Variable costs decrease by $0.25 per cake.		cakes
1d.	Sales price decreases by $0.60 per cake		cakes

2. Assume that Cove sold 480 cakes last month. Calculate the companys degree of operating leverage. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

Degree of Operating Leverage

3. Using the degree of operating leverage, calculate the change in profit caused by a 14 percent increase in sales revenue. (Round your intermediate values to 2 decimal places. (i.e. 0.1234 should be entered as 12.34%.))

Effect on Profit