You are planning to open a bakery that specializes in cupcakes. You know the variable cost...

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You are planning to open a bakery that specializes in cupcakes. You know the variable cost to make one cupcake is $0.50 and you expect to sell them for $3.00 each. The location you are considering has a fixed cost (rent, utilities, taxes, etc.) of $5,000 per month. You are unsure what the demand for your cupcakes will be, but have done some market research and estimated the following demand scenarios and probability of each level of demand. Demand Level Low Demand Medium Demand High Demand Monthly Cupcakes Sold 1,500 5,000 12,000 Probability 30% 50% 20% a) How many cupcakes do you need to sell each month to break even? (3 points) b) What is the total monthly cost (fixed plus variable) for your bakery if there is low demand for cupcakes? (3 points) c) What is the expected value of the total monthly cost for your bakery? (3points) You are planning to open a bakery that specializes in cupcakes. You know the variable cost to make one cupcake is $0.50 and you expect to sell them for $3.00 each. The location you are considering has a fixed cost (rent, utilities, taxes, etc.) of $5,000 per month. You are unsure what the demand for your cupcakes will be, but have done some market research and estimated the following demand scenarios and probability of each level of demand. Demand Level Low Demand Medium Demand High Demand Monthly Cupcakes Sold 1,500 5,000 12,000 Probability 30% 50% 20% a) How many cupcakes do you need to sell each month to break even? (3 points) b) What is the total monthly cost (fixed plus variable) for your bakery if there is low demand for cupcakes? (3 points) c) What is the expected value of the total monthly cost for your bakery? (3points)

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a To calculate the breakeven point you need to determine the total contribution margin per cupcake a... View the full answer