The Eastwood Cake Factory Sells Chocolate Cakes, Birthday Decorated Cakes

Essay

The Eastwood Cake Factory sells chocolate cakes, birthday decorated cakes, and specialty cakes. The factory is experiencing a bottleneck and is trying to determine which cake is more profitable. Even though the company may have to limit the orders that it takes, Eastwood is concerned about customer service and satisfaction. $$\begin{array} { | l | l | l | l | } \hline & \begin{array} { l } \text { Chocolate } \\\text { Cake }\end{array} & \begin{array} { l } \text { Birthday } \\\text { Cake }\end{array} & \begin{array} { l } \text { Specialty } \\\text { Cake }\end{array} \\\hline \text { Sales price } & \$ 20.00 & \$ 45.00 & \$ 60.00 \\\hline \text { Variable cost per cake } & \$ 5.00 & \$ 12.00 & \$ 20.00 \\\hline \begin{array} { l } \text { Hours needed to bake, frost, } \\\text { and decorate }\end{array} &1 \text { hour } & 2.5 \text { hour }&2 \text { hour } \\\hline\end{array}$$ a) Calculate the contribution margin per hour per cake.
b) Determine which cakes the company should try to sell more of first, second, and then last.