Sarah is planning to start her own cake shop. Thecost of making a cake is RM13 each and they aresold at RM45 each. Her estimated monthly costincludes rent (RM1,200) and utilities (RM500).a. Calculate the price markup percentage.b. Determine the break-even point for Sarah.c. How much sales revenue must Sarah make toachieve break-even point?d. If Sarah wants to achieve an annual profit ofRM150,000, how many cakes must she sell eachmonth?e. Sarah wants to provide each cake with apackaging box at extra cost of RM2.00 per unit. Ifshe does this, determine the annual sales unit toachieve his annual profit. ,

GIVEN Sarah is planning to start her own cake shop. The cost of making a cake is RM13 each and they are sold at RM45 each. Her estimated monthly cost includes rent (RM1,200) and utilities (RM500). a) Markup percentage = [(Selling price - Cost price) / Cost price] * 100 = [(45 - 13) / 13] * 100 = 246.15% b) Break even point occurs when total revenue = total cost Total revenue from X units sold is 45X Total cost of X units = Fixed cost (Rent + Utility) + Variable cost = 1,700 + 13X Thus, break even occurs when 45X = 1,700 + 13X X = 53.125 c) At break even, revenue = 45 * 53.125 = 2,390.625 d) Annual profit = Total revenue - Total cost = 150,000 45X - 1,700 - 13X = 150,000 X = 4,740.625 e) As box cost rises by 2, variable cost rises to 15X To get the annual profit of 150,000, 45X - 1,700 - 15X = 150,000 X = 5,056.66

Answered: Sarah is planning to start her own cake…

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Sarah is planning to start her own cake shop. The cost of making a cake is RM13 each and they are sold at RM45 each. Her estimated monthly cost includes rent (RM1,200) and utilities (RM500).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Cost of Production

In economic theory, production costs are the costs incurred by an industrial organization when it engineers a project or provides a service that generates revenue and benefits. Labor costs, raw materials, consumable manufacturing costs, and general overhead sum up, accounting for production costs. Total cost data is calculated by combining total direct costs of materials, labor costs, and total production costs.

Question

Sarah is planning to start her own cake shop. The
cost of making a cake is RM13 each and they are
sold at RM45 each. Her estimated monthly cost
includes rent (RM1,200) and utilities (RM500).
a. Calculate the price markup percentage.
b. Determine the break-even point for Sarah.
c. How much sales revenue must Sarah make to
achieve break-even point?
d. If Sarah wants to achieve an annual profit of
RM150,000, how many cakes must she sell each
month?
e. Sarah wants to provide each cake with a
packaging box at extra cost of RM2.00 per unit. If
she does this, determine the annual sales unit to
achieve his annual profit. ,

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