http://ezto.mheducation.com/hm.tpx Chapter 6 Homework - Logout successful -Unive

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http://ezto.mheducation.com/hm.tpx Chapter 6 Homework - Logout successful -University o.. Chapter 6 Homework - Connect 2. 166 points Cove's Cakes is a local bakery Price and cost information follows $ 13.71 Price per cake Variable cost per cake 223 1 03 0.13 $3.405 60 Ingredients Direct labor Overhead (box, elc) Flxed cost per month Required: 1. Calculate Cove's new break even point under each of the following independent scenarios (Round your answer t a. Sales price increases by $1.10 per cake. cakes b. Fixed costs increase by $485 per month cakes c. Variable costs decrease by $0.41 per cake cakes d. Sales price decreases by $0.40 per cake cakes

Explanation / Answer

Price per cake 13.71 Less Variable cost Ingridients 2.23 Direct labor 1.03 Overheads 0.13 Total variable cost 3.39 Contribution margin 10.32 Breakeven in units = Fixed cost / contribution margin per unit Fixed cost 3405.6 Contribution margin 10.32 Breakeven in units 330 Cakes a Price per cake 14.71 Less Variable cost Ingridients 2.23 Direct labor 1.03 Overheads 0.13 Total variable cost 3.39 Contribution margin 11.32 Breakeven in units = Fixed cost / contribution margin per unit Fixed cost 3405.6 Contribution margin 11.32 Breakeven in units 301 Cakes b Price per cake 13.71 Less Variable cost Ingridients 2.23 Direct labor 1.03 Overheads 0.13 Total variable cost 3.39 Contribution margin 10.32 Breakeven in units = Fixed cost / contribution margin per unit Fixed cost 3890.6 Contribution margin 10.32 Breakeven in units 377 Cakes c Price per cake 13.71 Less Total variable cost 2.98 (3.39-.41) Contribution margin 10.73 Breakeven in units = Fixed cost / contribution margin per unit Fixed cost 3405.6 Contribution margin 10.73 Breakeven in units 317 Cakes d Price per cake 13.31 (13.71-.40) Less Variable cost Ingridients 2.23 Direct labor 1.03 Overheads 0.13 Total variable cost 3.39 Contribution margin 9.92 Breakeven in units = Fixed cost / contribution margin per unit Fixed cost 3405.6 Contribution margin 9.92 Breakeven in units 343 Cakes 2 Contribution margin 3560.4 (10.32*345) Less Fixed cost 3405.6 Net operating income 154.8 Degree of operating leverage = Contribution margin / net operating income Contribution margin 3560.4 Net operating income 154.8 Degree of Operating leverage 23 3 Change in operating income = Degree of operating leverage * change in sales Change in operating income = 23 * 9% 207%

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