Question

Lucy's bake shop makes cupcakes that cost $.95 each. Lucy knows that 20% of the cupcakes...

Lucy's bake shop makes cupcakes that cost $.95 each. Lucy knows that 20% of the cupcakes will spoil. Assume Lucy wants to 35% markup on cost and produces 60 cupcakes. What should Lucy charge for each cupcake?

Round to the nearest cent.
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Answer #1

Cost of producing 60 cupcakes = 60 cupcakes * $0.95 each cupcake i.e. $57

Desired Markup on Cost = 35% of total cost

= 35% of $57

= $19.95

Desired Sales Revenue = Total Cost of producing 60 cupcakes + Desired Markup

= $57 + $19.95

= $76.95

Number of Cupcakes to be sold = Cup Cakes produced * (1 - Expected Spoilage)

= 60 cupcakes * (1 - 0.20)

= 48 cupcakes

Charges for Each Cupcake = Desired Sales Revenue / Number of Cupcakes to be sold

= $76.95 / 48 cupcakes

= $1.603125 or $1.60 for each cupcake

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