Reference no: EM132860669

Question - Case 1: You have just opened a bakery selling high-end muffins and would like to make $50,000 per year.:

You sell muffins in boxes of a dozen but you price each muffin at $3.00. Each muffin costs $0.30 in ingredients plus a 5¢ paper cup. Each shipping box costs $1.20.

Rent on the bakery is $2,000 per month and utilities are estimated at $700 each month. In addition, there is an annual health inspection fee which last year was $220.

Required (SHOW ALL YOUR WORK)

a) With respect to the number of boxes of muffins, what kind of cost is the health inspection fee?

b) What is your contribution margin on each box of yummy tasty muffins?

c) How many boxes of muffins must you sell to reach your target profit?

Case 2 (5 MARKS): Heather is a big Leaf's fan. She decides to open a shop selling Leaf's gear. The biggest seller will be the Leaf jerseys so Heather makes her plans based on that.

A licensed Leaf jersey will cost her $75. Store rent will cost her $10,000 a month. Since she can't be there all the time she needs to hire two staff at $3,000 per month each.

The big question is what the price of a sweater will be. If the Leafs make the playoffs and go deep, some of the sweaters will become very popular and will sell for $250 each. If the Leafs play poorly and don't make the playoffs, sweaters will sell for $200 each.

Required (SHOW ALL YOUR WORK)

a) In both a worst case and best case scenario, how many sweaters does Heather have to sell each month to make a target profit of $84,000 per year?

b) Briefly state whether this is a good business for Heather and why.