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# What is the new break-even point if the number of units sold increases by 25%? Explain your results.

Assume that monthly electricity costs (based on the cheapest electricity provider) and production levels from Part 1 are given as historical data. Complete this table and answer required questions using the following assumptions: ï‚· Direct material cost per cake is 60 cents. ï‚· Each cake requires 10 minutes direct labour work and the labour rate is \$24 ï‚· per hour. ï‚· Use the total number of cakes as the cost driver. ï‚· The relevant range is between 6,500 and 9,800 cakes. Month 1. What is the breakeven point in units and sales dollars for the year for each type of cake? 2. Calculate the number of each type of cake and their dollar values that must be sold to beak-even, assuming that the tax rate is 30 per cent. Explain your results. 3. Calculate the margin of safety in units and dollars for a year assume the budgeted sales is the same as given figures in Part 1. Explain your results. 4. Use the degree of operating leverage to investigate the impact of 20% increase and 20% decrease in the sales revenue on profit. Explain your results. 5. If it is expected that fluctuations in sales will rise, what is your recommendation about the cost structure for this business? 6. Calculate the number of each type of cake and their dollar values that must be sold to achieve a targeted after tax profit of \$150,000 assuming that the tax rate is 10 per cent. 7. If the fixed cost increases by \$20,000 per year and the variable cost decreases by 10%. How many of each type of cake do they need to sell to breakeven assuming the same sales mix? 8. If the variable cost per cake increases by 15% and selling price by 20%, what would be the profit? 9. What is the new break-even point, if both fixed costs and contribution margins increase by 20%? Explain your results. 10. What is the new break-even point if the number of units sold increases by 25%? Explain your results.

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