Cupcake Accounting

To Owner of the Local Cupcake Guild:

We were doing cost functions in my "Cost Accounting" class and I was called upon to make up a fictitious business an the associated numbers so we could do some work on contribution margin.

Naturally I chose a cupcake factory as the business and the information as follows.

Cupcake price: $1.50
Cupcake material cost: $0.60
Fixed costs: $350 (machinery, kitchen inspection bribes, booze, et cetera)
Tax rate: 20%

Contribution margin per cupcake: $0.90

Break even point (profits = 0): 398 cupcakes sold

Cupcakes sold to make pre-tax $30,000 = 33,334

Cupcakes sold to make post-tax $30,000 = 41,667

So if it took you an hour to make and sell 24 cupcakes, you would only need to work 1736.13 hours in a year (or 33.4 hours a week) to make a post tax income of $30,000.

Not bad.

I also want you to imagine that for around an hour 35 or so frustrated accounting students were crunching the numbers on your business.

K