Sweet Treats makes cakes for special occasions. Each cake takes the cake decorator plenty of time to prepare and good cake decorators are in limited supply. The following information has been collected:

Wedding cakes Birthday cake Kids cakes

Selling price per unit 120 90 75

Variable cost per unit 50 60 50

Fixed cost per unit 30 20 35

Decorating time required per cake (in hrs) 1.50 0.50 0.70

Weekly demand 10 60 30

Required:

1. The cake decorator is available 60 hours a week. Which product mix should they focus on to maximize profits? With this product mix, what will the total contribution margin amount to?

2. Another bake shop has offered to work on some cakes at a fixed rate of $50 per hour. Management is confident that this work is of acceptable quality. Should management accept the offer? Which product should they focus on? Why?