Question 2: Cost Volume - Profit (3.0)

Zan Bun is the sole producer of cakes in the Changlun region. The company only produces one type of cake, and it is sold at $10 each. The variable cost for making a cake is $5 and the fixed cost of the company is at $50,000 per year.

Determine:

a. The contribution margin per cake and the contribution margin ratio (1.0)

b. The number of cakes that has to be sold in order to achieve a profit of $30,000 a year (1.0)

d. If the fixed cost is estimated to increase by10% next year, calculate the new break-even point for the company (1.0)