You will assume the role of an entrepreneur starting a small company. Your company will produce and sell gourmet cupcakes through a storefront in a location of your choice. Your business is scheduled to launch on January 1, 2018.

Cost information:

Cost of goods sold:

Ingredients are .30 per cupcake

Boxes and Cupcake Cups are .05 per cupcake

Equipment that will be required to be acquired at the start of business includes ovens, racks, display case, counter, cash register, and other baking equipment and will cost $140,000. The equipment is expected to last 10 years without salvage value. Straight-line method of depreciation should be used.

On average one person can make, bake, and decorate 24 cupcakes per hour. Bakers are paid $15.00 per hour.

Sales personnel are required for 56 hours per week and are paid $10.00 per hour.

Monthly rent, which includes utilities, is $1,500.

Business insurance is purchased at a cost of $1,000 per year.

Advertising costs are expected to be $6,000 per year.

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Develop a price using a target price (what do you think a customer will pay for one of your cupcakes? What are other companies charging for gourmet cupcakes?) Provide support for your target price

Develop a price using cost-based pricing assuming that you expect to sell 24,000 cupcakes the first year and would like to have a 20% profit

Using the price you calculated using cost based pricing in #6, calculate contribution margin per cupcake and contribution margin ratio

Based on the price you calculated in #6, calculate how many cupcakes need to be sold in order to break-even. Calculate how much sales in dollars are needed to break-even