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:

1. Calculate the contribution margin per unit of the cake
2. Identify the fixed costs and find total fixed costs per unit
3. Calculate profit earned in each month and annual profit