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Question - Pastry Shop X produces premium vanilla cakes for the Toronto hospitality industry. It has a production capacity of 26,000 Cakes per year and currently it uses 75% of its production capacity and sells everything it produces. The Ottawa Hotel Association sent him a voucher for a special order of 6,000 chocolate cakes for this year alone. Either the data:
Vanilla cake selling price: $35
Price offered for chocolate cakes: $22
Variable cost of manufacture: $13.50
Fixed administration fee: $4.40
Variable Selling Fee: $3.50
Cost of chocolate: $2.50
The recipe for both cakes is the same except for substituting vanilla for chocolate. Selling costs are not incurred, as it was the potential customer who approached the pastry shop.
If the pastry shop accepts the order, how much will its profit increase this year?
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