E6-4 Analyzing Changes in Price, Cost Structure, Degree of Operating Leverage [LO 6-4, 6-5]

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

Price per cake	$	14.31
Variable cost per cake
Ingredients		2.33
Direct labor		1.11
Overhead (box, etc.)		0.19
Fixed cost per month	$	3,524.40

Required: 1. Calculate Coves new break-even point under each of the following independent scenarios: (Round your answer to the nearest whole number.) a. Sales price increases by $1.50 per cake. b. Fixed costs increase by $475 per month. c. Variable costs decrease by $0.25 per cake. d. Sales price decreases by $0.40 per cake. 2. Assume that Cove sold 355 cakes last month. Calculate the companys degree of operating leverage. (Do not round intermediate calculations. Round your answer to 2 decimal places.) 3. Using the degree of operating leverage calculated in Requirement 2, calculate the change in profit caused by a 6 percent increase in sales revenue. (Round your final answer to 2 decimal places (i.e. .1234 should be entered as 12.34%.))