CSA Financial Planning & Budgeting 2 — Questions and Answers
Question 1: A sugar artist charges $450 for a wedding cake and spends $120 on supplies. What is the gross profit margin?
- 26.7%
- 73.3% (Correct answer)
- 37.5%
- 62.5%
Correct answer: 73.3%
Gross profit margin = (Revenue - COGS) / Revenue × 100 = ($450 - $120) / $450 × 100 = 73.3%.
Question 2: Which pricing strategy sets prices based on what competitors charge for similar sugar art pieces?
- Cost-plus pricing
- Value-based pricing
- Competitive pricing (Correct answer)
- Penetration pricing
Correct answer: Competitive pricing
Competitive pricing sets prices relative to what competitors charge for comparable products.
Question 3: A sugar artist wants to save $6,000 for a new airbrush system over 12 months. How much must be set aside monthly?
- $400
- $500 (Correct answer)
- $600
- $700
Correct answer: $500
$6,000 ÷ 12 months = $500 per month must be saved.
Question 4: What does accounts receivable represent on a sugar art business's balance sheet?
- Money owed to suppliers
- Money customers owe the business (Correct answer)
- Cash in the bank
- Outstanding business loans
Correct answer: Money customers owe the business
Accounts receivable represents money that customers owe the business for services or products already delivered.
Question 5: A cake studio has fixed monthly costs of $2,000 and sells cakes at $250 each with $80 variable cost. How many cakes must be sold to break even?
- 8
- 12
- 14 (Correct answer)
- 18
Correct answer: 14
Contribution margin = $250 - $80 = $170; break-even = $2,000 ÷ $170 ≈ 12 (rounding up to 12 is not enough — $2,040 > $2,000, so actually ceiling is 12, but $170×12=$2,040 covers $2,000), correctly 12 cakes.
Question 6: Which financial statement shows a sugar art business's revenues and expenses over a specific time period?
- Balance sheet
- Cash flow statement
- Income statement (Correct answer)
- Statement of equity
Correct answer: Income statement
The income statement (profit and loss statement) reports revenues and expenses over a defined accounting period.
Question 7: When calculating the true cost of a custom sugar sculpture, which expense is most commonly overlooked by new sugar artists?
- Cost of fondant
- Labor time for design consultation (Correct answer)
- Packaging materials
- Food coloring
Correct answer: Labor time for design consultation
New artists frequently forget to charge for pre-production time like consultations, sketching, and revision discussions.
CSA Financial Planning & Budgeting 2
A sugar artist charges $450 for a wedding cake and spends $120 on supplies.
What is the gross profit margin?