The Flour Power Bakery makes 200 cherry cheesecakes at a cost of $2.45 each. If a spoilage rate of 5% is anticipated, at what price should the cakes be sold to achieve a 40% markup based on cost?
To determine the selling price of the cherry cheesecakes, we'll follow these steps:
1. Calculate the total cost of producing the cheesecakes:
Total cost = Number of cheesecakes * Cost per cheesecake
Total cost = 200 * $2.45
Total cost = $490
2. Determine the number of cheesecakes that may spoil:
Number of spoiled cheesecakes = Spoilage rate * Number of cheesecakes
Number of spoiled cheesecakes = 5% * 200
Number of spoiled cheesecakes = 0.05 * 200
Number of spoiled cheesecakes = 10
3. Adjust the total cost by accounting for the spoiled cheesecakes:
Adjusted total cost = Total cost / (Number of cheesecakes - Number of spoiled cheesecakes)
Adjusted total cost = $490 / (200 - 10)
Adjusted total cost = $490 / 190
Adjusted total cost ≈ $2.579
4. Calculate the desired markup based on the adjusted total cost:
Markup = Desired markup rate * Adjusted total cost
Markup = 40% * $2.579
Markup = $1.032
5. Determine the selling price:
Selling price = Adjusted total cost + Markup
Selling price ≈ $2.579 + $1.032
Selling price ≈ $3.611
Therefore, the cherry cheesecakes should be sold at a price of approximately $3.611 each to achieve a 40% markup based on the cost.
200 * 2.45 = $490
490 * 1.4 = $686
696 / 190 = $3.61