Marea's Cakes sells its cakes for $30 each. Ingredients cost Marea on average $10 per cake and
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Question:
Marea's Cakes sells its cakes for $30 each. Ingredients cost Marea on average $10 per cake and she pays her baker $10 per cake. For the upcoming year, Marea's fixed costs will be $50,000 and she expects to sell 50,000 cakes. The Easy Bake company has approached Marea with an automatic cake baker that would reduce Marea's baker costs to $1 per cake and ingredients costs to $9 per cake. The Easy Bake would cost Marea $400,000 per year in rental fees.
Required:
Comment on if Marea should rent the Easy Bake automatic cake baker (your answer needs to be backed-up with financial information).
Related Book For
Principles of Accounting
ISBN: 978-1133626985
12th edition
Authors: Belverd E. Needles, Marian Powers and Susan V. Crosson
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