Eastwood Cake Factory sells chocolate cakes, birthday cakes, and specialty cakes. The factory is experiencing a bottleneck and is trying to determine which cake is most profitable. Even though Eastwood may have to limit its orders, it is concerned about customer service and satisfaction.
Chocolate Cake Birthday Cake Specialty Cake
Sales price $20.00 $45.00 $60.00
Variable cost per cake $5.00 $12.00 $20.00
Hours needed to bake, frost, and decorate 1 hour 2.5 hours 2 hours
Required:
a. Calculate the contribution margin per hour per cake.
b. Determine which cakes the company should try to sell more of first, second, and then last.
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