Part A

Marisol makes wedding cakes from her home. A customer has requested two duplicate wedding cakes: one for the wedding and one to be frozen for their anniversary. The couple has offered $$400$ for both cakes instead of $$500($ $$250$ each$).$ The cost information to make one cake is shown.

For One Cake:

Direct materials

Direct labor

$$50$

Variable overhead $$25$

Fixed overhead $$10$

What is the cost to make one cake?

What cost would not be included in the second cake?

What is the cost of the second cake?

What would be the total cost of this order if the offer was accepted?

How much profit will Marisol be recording for this special order?

If your company policy is to always have a $15\%$ profit on all order, would you still accept this order?

If you would not accept the order, what price would you negotiate?