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4 January, 08:14

If the maximum operating capacity of the Gobblecakes bakery is 12,000 cupcakes annu - ally, determine the break-even volume as a percentage of that capacity. Gobblecakes is a bakery that specializes in cupcakes. The annual fixed cost to make cupcakes is $18,000. The variable cost including ingredients and labor to make a cupcake is $0.90. The bakery sells cupcakes for $3.20 apiece. If the bakery sells 12,000 cupcakes annually, determine the total cost, total revenue, and profit.

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  1. 4 January, 08:54
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    (a) 65.22%

    (b) $28,800; $38,400; $9,600

    Explanation:

    Total cost:

    = variable cost + fixed cost

    = (12,000 * 0.90) + 18,000

    = 28,800

    Total Revenue:

    = quantity of cupcakes sold * selling price of each cupcake

    = 12,000 * 3.2

    = 38,400

    Profit:

    = Total revenue - Total cost

    = 38,400 - 28,800

    = 9,600

    Break even sales:

    = Fixed cost : contribution margin

    = 18,000 : (3.2 - 0.90)

    = 7,826.087

    Break even volume in capacity:

    = Break even sales : Cupcakes produced

    = 7,826.087 : 12,000

    = 65.22%
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