Patisserie Saint-Honor produces high-end vanilla cakes for the Toronto hospitality industry. The pastry shop has a production

Patisserie Saint-Honoré produces high-end vanilla cakes for the Toronto hospitality industry. The pastry shop has a production capacity of 26,000 cakes per year and currently 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. Or the following data: Sales price of vanilla cakes 35.00 per unit Price offered for chocolate cakes 22.00 per unit Variable manufacturing cost 13.50 per unit Fixed administration costs 4.40 per unit Variable selling costs 3.50 per unit Cost of chocolate 2.50 per unit The recipe for both cakes is the same except for substituting vanilla for chocolate. Selling costs will not be incurred because it is the potential customer who approached the pastry shop.

If the pastry shop accepts the order, how much will its profit increase this year? And Suppose the Patisserie is at 90% of its capacity and sells everything it produces, what will be the unit price that Saint-Honoré will charge to proceed with the order?

Answer rating: 100% (QA)

1Currently only 75 of capacity is using 25 unused capacity is available Available capacity total cap... View the full answer