High School

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Cove's Cakes is a local bakery. The price per cake is $20, and the variable cost per cake, including ingredients and direct labor, is $10. The bakery's fixed costs per month are $2,000.

What is Cove's Cakes' contribution margin per cake?

a) $10
b) $5
c) $15
d) $20

Answer :

Final answer:

The correct option is (a) $10. Cove's Cakes' contribution margin per cake is $10, which is found by subtracting the variable cost per cake from the selling price per cake.

Explanation:

The correct option is (a) $10. The student asked about the contribution margin per cake for Cove's Cakes, which is a local bakery. The contribution margin per unit can be calculated by subtracting the variable costs from the selling price. In this case, the price per cake is $20, and the variable cost per cake is $10. Therefore, the contribution margin is $20 - $10, which equals $10 per cake.

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