Question

Dorothy Taylor owns and operates SandhillCakes, a bakery that creates personalized birthday cakes for a child's first birthday. The cakes, which sell for $40 and feature an edible picture of the child, are shipped throughout the country. A typical month's results are as follows: Sales revenue Variable expenses Contribution margin Fixed expenses Operating income $796,000 597.000 199,000 109,500 $ 89,500 (a) How many cakes will Dorothy Taylor have to sell if she wants to earn $144,000 in operating income each month? cakes

Answer 1

Cakes sold (currently) $ 7,96,000 / $ 40 19,900 cakes Cotribution Margin per cake $ $ 1,99,000 / 19,900 cakes 10 per cake Desired Sales (in units) (Fixed Expenses + Desired profits) / Contribution per unit ($ 109,500 + $ 144,000 ) / $ 10 $ 2,53,500 / 10 25,350 cakes

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