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Answer :
1. Break-even point: Calculate the number of cakes needed to cover fixed and variable costs.2. Margin of safety: Find the difference between actual sales and the break-even point.3. Profit target: Determine the number of cakes needed to achieve the desired profit of $1,800.
1. Cove's break-even point can be determined by dividing the fixed costs by the contribution margin per unit. The contribution margin per unit is calculated by subtracting the variable costs per unit from the price per cake. In this case, the contribution margin per cake is $14.91 - $2.34 - $1.05 - $0.13 = $11.39. To calculate the break-even point in units, divide the fixed costs ($3,872.60) by the contribution margin per cake ($11.39), resulting in approximately 340 cakes.
2. The margin of safety can be calculated by subtracting the break-even point (in units) from the actual sales volume. In this case, if Cove's currently sells 430 cakes per month and the break-even point is approximately 340 cakes, the margin of safety would be 430 - 340 = 90 cakes.
3. To determine the number of cakes Cove must sell to generate a specific profit of $1,800, the contribution margin per cake can be used. Dividing the desired profit ($1,800) by the contribution margin per cake ($11.39) will give the number of cakes required to generate that profit. In this case, $1,800 / $11.39 is approximately 158 cakes.
To learn more about Variable costs : brainly.com/question/14280030
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