C ezto.mheducation.com/hm.tpx Cove\'s Cakes is a local bakery. Price and cost in
ID: 2542398 • Letter: C
Question
C ezto.mheducation.com/hm.tpx Cove's Cakes is a local bakery. Price and cost information follows: $ 13.51 Price per cake Variable cost per cake Ingredients Direct labor Overhead (box, etc.) 2.34 1.02 0.28 3,750 60 Fixed cost per month Required: 1. Determine Cove's break-even point in units and sales dollars. (Round your Break-Even Units places.) Break-Even Units Cakes Break-Even Sales Dollars 2. Determine the bakery's margin of safety if it currently sells 450 cakes per month. (Round your inte 3. Determine the number of cakes that Cove must sell to generate $2,200 in profit. (Round your intern Cakes Type here to searchExplanation / Answer
Answer:-1)-Break even point (in units):-Fixed cost/ Contribution margin per unit
=$3750.60/$9.87 per unit = 380 units
Break even point (in dollars):-Fixed cost/ Contribution margin ratio
=$3750.60/73.06% = $5134
Where:-
Contribution margin per unit =Selling price per unit – Variable cost per unit
=$13.51- ($2.34+$1.02+$.28)
=$13.51 - $3.64 = $9.87 per unit
Contribution margin ratio =($9.87/$13.51)*100 = 73.06%
2)-Margin of safety = Actual sales – Break even point
=(450 units*$13.51 per unit) – (380 units*$13.51 per unit)
=$6079.50 - $5133.80
=$945.70
3)-Target sales units =($3750.60+$2200)/$9.87 per unit
=$5950.60/$9.87 per unit =603 cakes (units)
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