E6-3 Determining Break-Even Point, Target Profit, Margin of Safety [LO 6-1, 6-2,
ID: 2533589 • Letter: E
Question
E6-3 Determining Break-Even Point, Target Profit, Margin of Safety [LO 6-1, 6-2, 6-3] Cove's Cakes is a local bakery. Price and cost information follows: $13.01 Price per cake Variable cost per cake Ingredients Direct labor Overhead (box, etc.) 2.20 1.20 0.27 $4,203.00 Fixed cost per month Required 1. Determine Cove's break-even point in units and sales dollars. (Round your Break-Even Units answer to the nearest whole number. Round your other intermediate calculations and sales dollars answer to 2 decimal places.) Break-Even Units Cakes Break-Even Sales Dollars 2. Determine the bakery's margin of safety if it currently sells 490 cakes per month. (Round your intermediate calculations to 2 decimals. Round the break-even units and final answer to nearest whole dollar.) n of Safety 3. Determine the number of cakes that Cove must sell to generate $1,100 in profit. (Round your intermediate calculations to 2 decimal places and final answer to nearest whole number) Target Sales Units CakesExplanation / Answer
Break even point = 4203/(13.01-3.67) = 450 cakes
Break even point dollars = 450*13.01 = 5854.50
2) Margin of safety = 490-450 = 40 cakes
Margin of safety = 40*13.01 = 520.40
3) Target sale unit = (4203+1100)/9.34 = 568 cakes
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