Question

Cove's cakes is a local bakery. price and cost information follows: price per cake $ 13.41 variable cost per cake ingredients 2.27 direct labor 1.09 overhead (box, etc.) 0.13 fixed cost per month $ 3,372.80 required: 1. determine cove's break-even point in units and sales dollars.

Answer 1

With the data given in the question, break-even point in units is as follows: 13.41 - 2.27 - 1.09 - .13 = 9.92 Gross profit per cake sold. All we did was take the selling price of each unit and subtract all variable costs from the sale price to get the gross profit per cake. Next we divide fixed costs per month by gross profit per cake to know how many units must be sold to break even. As follows: 3372.80 / 9.92 = 340. Any units sold after the 340th unit will be beyond break even so the break even point in units is 340. Break even point in sales dollars simply the unit break even number multiplied by the retail price per cake which is as follows: 340 * 13.41 = 4,559.4 So break even point in sales dollars is $4,559.40.