Answer:
Instructions are listed below.
Explanation:
Giving the following information:
Price per 2-scoop sundae $ 5.00
Variable cost per sundae:
Ingredients 1.35
Direct labor 0.45
Overhead 0.20
Total variable cost= $2
Fixed cost per month $ 5,100
1. Determine Izzy’s break-even point in units and sales dollars.
Break-even point (units)= fixed costs/ contribution margin
Break-even point (units)= 5,100/ (5 - 2)= 1,700 units
Break-even point (dollars)= fixed costs/ contribution margin ratio
Break-even point (dollars)= 5,100/ (3/5)=$8,500
2. Determine how many sundaes must be sold to generate a profit of $10,200.
Break-even point (units)= (fixed costs + profit)/ contribution margin
Break-even point (units)= (5,100+ 10,200) / 3= 5,100 units
3. a. Sales price decreases by $0.50.
Break-even point (units)= 5,100/ (4.5 - 2)= 2,040 units
b. Fixed costs decrease by $300 per month.
Break-even point (units)= 4,800/3= 1,600 units
c. Variable costs increase by $0.50 per sundae.
Break-even point (units)= 5,100/ (5 - 2.5)=2,040 units
4. How many sundaes must Izzy sell to generate a profit of $24,000, if sales price increases by $0.50 and variable costs increase by $0.30
Break-even point (units)= (5,100 + 24,000) / (5.5 - 2.3)= 9,094 units
