Question

A local bakery sells cupcakes for $3.50 each. The fixed monthly cost totals $275 which includes rent, utilities, and wages. Each cupcake costs the bakery 0.90 to make.

Answer 1

Answer: 110 cupcakes

Explanation:

Assuming this question is asking for the breakeven point, you can find that by using the formula:

= Fixed cost / Contribution margin

Contribution margin = Sales price - variable cost (amount to make one cupcake)

= 3.50 - 0.90

= $2.60

Breakeven point = 275 / 2.60

= 109.77

= 110 cupcakes