Reference no: EM132664877

Problem 1: Californiaco makes cakes. In answering the question below, assume that the offer is "all or nothing"- if Californiaco accepts the offer, it must accept the whole offer (and possibly give up part of its usual sales). Based on quantitative information only, what should Californiaco do in the situation described below? Show both the four-step method and the before-and-after CFISes.

Cakes (Monthly)

Current Volume 500
Capacity 550
Sales Price $32
Variable Costs $8.50
Monthly Fixed Costs $3,200

Oaklandco would like to order 112 cakes and pay $24.25 per cake. Oaklandco is not interested in the quality of the cakes, so Californiaco estimates that it can use cheaper ingredients and therefore reduce variable cost per cake by $1.20. In addition, Oaklandco will provide baking pans and other cooking equipment, which will save Californiaco $85 in fixed costs during the month