Please answer the following questions for this business proposal:

1.Compute average total costs (i.e. the sum of average fixed costs and average variable costs). Compare it to your sales price. Why is the difference important?

2.Assume that your volume drops 10%. Are you still profitable? What if your volume drops 20%?

3.Compute the contribution margin in its various forms, the break-even point, the margin of safety, and the operating leverage.

4.Perform a sensitivity analysis for a 10% drop in volume and for a 20% drop in volume.

5.Are you profitable? Are you solvent? Have you created value?

Our business, Sweet Treats, aims to provide high-quality baked goods made with locally sourced ingredients to customers in the downtown area.Our primary customers are young professionals and families who are looking for delicious and healthy baked goods that are made with natural ingredients and free from preservatives.Our main competition includes other local bakeries and cafes in the downtown area that offer similar products, as well as larger chain stores.

OPERATIONS

We will need a commercial kitchen, baking equipment, and high-quality ingredients to produce our baked goods. We will also need a storefront location and staff to manage daily operations.Initially, we plan to serve around 50-100 customers per day, with the goal of increasing that number as we gain popularity and expand our offerings.We plan to offer a variety of baked goods, including cakes, cookies, bread, and pastries, with a focus on seasonal ingredients and unique flavor combinations.Our prices will be competitive with other local bakeries, with a focus on offering high-quality, natural ingredients at an affordable price point.

FINANCE

We expect to own baking equipment, inventory, and a storefront location.We will need to incur liabilities such as rent, utilities, and staff salaries.We expect to receive revenue from the sale of our baked goods, as well as catering orders and special events.Our expenses will include the cost of ingredients, equipment maintenance, and marketing.We plan to obtain capital through a combination of personal savings, small business loans, and crowdfunding.

MANAGEMENT

Our mission is to provide delicious, healthy baked goods made with locally sourced ingredients to our customers, while also supporting local farmers and businesses.