Cove’s Cakes is a local bakery. Price and cost information
follows:
Price per cake  $  14.11  
Variable cost per cake  
Ingredients  2.29  
Direct labor  1.06  
Overhead (box, etc.)  0.12  
Fixed cost per month  $  4,894.40  

2. Determine the bakery’s margin of safety if it currently sells 540 cakes per month. (Round your intermediate calculations to 2 decimals. Round the breakeven units and final answer to nearest whole dollar.)

3. Determine the number of cakes that Cove must
sell to generate $2,500 in profit. (Round your intermediate
calculations to 2 decimal places and final answer to nearest whole
number.)

1. Determine Cove’s breakeven point in units and sales dollars.
Break even point (units) = 4894.40/(14.113.47) = 460 Cakes
Break even point (dollar sales) = 460*14.11 = 6490.60
2. Determine the bakery’s margin of safety if it currently sells 540 cakes per month.
Margin of safety = Actual salesbreak even sales
= 540460
Margin of safety = 80 Cakes
3. Determine the number of cakes that Cove must sell to generate $2,500 in profit.
Target units sales = (4894.40+2500)/(14.113.47) = 695 Cakes
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