The Flower Power Bakery makes 200 cherry cheesecakes at a cost of $2.45 each. If a spoilage rate of 5% is anticipated, at what price should the cakes be sold to achieve a 40% markup based on cost?
Homework Posting Tips
Please show your work. Tutors will not do your homework for you. Please show your work for any question that you are posting.
accounting/stock dividends, don't understand the equity/balance sheet?
To find the selling price of the cherry cheesecakes, we need to consider the cost of making the cakes, the spoilage rate, and the desired markup percentage.
First, let's calculate the number of cheesecakes that will be spoiled due to the anticipated spoilage rate:
Spoilage rate = 5%
Number of cheesecakes = 200
Number of spoiled cheesecakes = Spoilage rate * Number of cheesecakes
Number of spoiled cheesecakes = 0.05 * 200 = 10
Now, let's calculate the total cost of producing 200 cheesecakes:
Cost per cheesecake = $2.45
Number of cheesecakes = 200
Total production cost = Cost per cheesecake * Number of cheesecakes
Total production cost = $2.45 * 200 = $490
Next, let's calculate the desired markup based on cost:
Markup percentage = 40%
Total production cost = $490
Markup amount = Markup percentage * Total production cost
Markup amount = 0.40 * $490 = $196
The desired selling price is the sum of the total production cost and the markup amount:
Selling price = Total production cost + Markup amount
Selling price = $490 + $196 = $686
Therefore, the cherry cheesecakes should be sold for $686 to achieve a 40% markup based on cost.