Refer to Scenario 9

question 198

Multiple Choice

Refer to Scenario 9.8 below to answer the question(s) that follow.
SCENARIO 9.8: Investors put up $1,040,000 to construct a building and purchase all equipment for a new gourmet cupcake bakery. The investors expect to earn a minimum return of 10 per cent on their investment. The bakery is open 52 weeks per year and sells 900 cupcakes per week. The fixed costs are spread over the 52 weeks (i.e. prorated weekly) . Included in the fixed costs is the 10% return to the investors and $2,000 in other fixed costs. Variable costs include $2,000 in weekly wages, and $600 per week in materials, electricity, etc. The bakery charges $8 on average per cupcake.
-Refer to Scenario 9.8. If the bakery were to shut down, losses per week would be

• A) $2,000.
• B) $3,600.
• C) $4,000.
• D) $7,200.

---

Definitions:

Drawer

A compartment for holding or storing items, or in financial terms, the person who writes a bill of exchange or check.

Payee

The party to whom payment of a promissory note is to be made.

Drawee

The party in a transaction who is directed to pay a certain amount of money, often seen in the context of a check or draft.

Internal Control

Processes and procedures implemented by an organization to ensure the integrity of financial and accounting information, promote accountability, and prevent fraud.