Question
Purchase Price per cake: $6 Selling price per cake $10 Your friend Ruby has been approached by his best friend Paulina and asked whether she
Purchase Price per cake: $6
Selling price per cake $10
Your friend Ruby has been approached by his best friend Paulina and asked whether she is interested in buying her Cake confectionery business-a medium scale business selling one very special cake here in Toronto, ON Canada imported from United States of America USA.
Here are the Operating costs:
Two shop staff salary : $4,500 per shop staff per month
Shop Office Rental: $6,000 per month
Other expenses (do not vary with Sales volume) $3,500 per month
Monthly Sales Volume: $12,000 cakes
Loyal customers
$700,000 in selling the business
Annual Profit: $140,000
Return on Investment: 21% per annum
Again, Ruby considers that the profit and the rate of returns are very attractive but she is weak in accounting. Help Ruby by solving the following questions:
- Calculate the contribution margin per unit of the cake
- Identify the fixed costs and find total fixed costs per unit
- Calculate profit earned in each month and annual profit
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