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12.03.2020 •
Business
Cove’s Cakes is a local bakery. Price and cost information follows: Price per cake $ 14.21 Variable cost per cake Ingredients 2.16 Direct labor 1.08 Overhead (box, etc.) 0.17 Fixed cost per month $ 3,348.00 Required: 1. Calculate Cove’s new break-even point under each of the following independent scenarios: a. Sales price increases by $1.80 per cake. b. Fixed costs increase by $470 per month. c. Variable costs decrease by $0.37 per cake. d. Sales price decreases by $0.40 per cake. 2. Assume that Cove sold 325 cakes last month. Calculate the company’s degree of operating leverage. 3. Using the degree of operating leverage, calculate the change in profit caused by a 7 percent increase in sales revenue.
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Ответ:
1. a. Break even point with increase in sales price - 266 units
b. Break even point with increase in fixed costs - 354 units
c. Break even point with decrease in variable cost - 300 units
d. Break even point with decrease in sales price - 322 units
2. Degree of operating leverage 21.67
3. The change in profit caused by a 7 % increase in revenue is 3.1 times
Explanation:
Computation of break even point with an increase in sales price by $ 1.80 per cake
Sales price $ 14.21 + $ 1.80 = $ 16.01
Materials $ 2.16
Direct Labor $ 1.08
Indirect Material $ 0.17
Variable Costs per unit $ 3.41
Contribution margin $ 12.60
Fixed costs $ 3,348
Break even points $ 3,348/ $ 12.60 266 units
Computation of break even point with an increase in fixed costs by $ 470
Sales price $ 14.21 = $ 14.21
Materials $ 2.16
Direct Labor $ 1.08
Indirect Material $ 0.17
Variable Costs per unit $ 3.41
Contribution margin $ 10.80
Fixed costs ( $ 3,348 + 470) $ 3,718
Break even points $ 3,718/ $ 10.18 354 units
Computation of break even point with a decrease in variable costs by $ 0.37 per unit
Sales price $ 14.21 = $ 14.21
Materials ( $ 2.16 - $ 0.37) $ 1.79
Direct Labor $ 1.08
Indirect Material $ 0.17
Variable Costs per unit $ 3.04
Contribution margin $ 11.17
Fixed costs $ 3,348
Break even points $ 3,348/ $ 11.17 units 300 units
Computation of break even point with a decrease in sales price by $ 0.40 per cake
Sales price $ 14.21 -0.40 $ 13.81
Materials $ 2.16
Direct Labor $ 1.08
Indirect Material $ 0.17
Variable Costs per unit $ 3.41
Contribution margin $ 10.40
Fixed costs $ 3,348
Break even points $ 3,348/ $ 10.40 units 322 units
Computation of degree of operating leverage
Sales - 325 cakes at $ 14.21 per cake $ 4,618
Variable costs 325 cakes * $ 3.41 per cake $ 1,108
Contribution margin $ 3,510
Fixed costs $ 3,348
Operating income $ 162
Degree of operating leverage $ 3510/ $ 162 = 21.67 times
Computation of change in income by a change in sales revenue
Degree of operating leverage - 21.67 times
The change in net income is calculated by the formula
Degree in operating leverage = Change in operating income /change in sales
21.67/7= Change in Operating income
Change in operating income = 3.1 times
Ответ:
Example given below
Explanation:
The McCloskeys set a Long term direction which represents an educated guess about the future of their business. For example" the family started off as a successful veterinarian office in San Diego which" in turn they foreseen a bigger vision to improve the quality of farming" he broke his plan up into small steps. With strategic planning and using the VRIO system" they were able to understand the value was it a rare business" how much it cost and if the business was duplicable" per the text book.