The Business: Krazy Kakes is a dessert bar in Western New York that provides customers with the opportunity to experience a unique for its customers. It allows customers to sit around in a relaxed atmosphere as a live band plays music and they watch their desserts be created right before them. This unique spin on a dessert draws in customers from near and far to taste the incredible desserts and to also take in the show. The unique way that Krazy Kakes presents its product and the quality makes it a one of a kind company, especially in the market that it is currently operating in. With no competition this makes the business a monopoly. The whole package the company offers makes its service inelastic. The company strives to give its customers fair prices for the goods and the entertainment they have when enjoying the product but the price does not have an impact on the customers demand for the products offered.
Increase Revenue: As many businesses, Krazy Kakes is trying to find ways that it can capitalize in the market it is in currently and how it can increase profits. The company wants to expand how they offer their goods to customers by expanding. They want to reach customers through carry-out and special orders for events. By reaching customers in more ways the company is able to serve more and put more smiles on customers looking to sink a bite into a sweet treat.
Estimated Variable and Fixed Costs for Krazy Kakes:
Year 1 Year 2 Year 3
Sales $166,150 $241,525 $312,751
Direct Cost of Sales $32,123 $47,232 $60,499
Other Production Expenses $0 $0 $0
Total Cost of Sales $32,123 $47,232 $60,499
Gross Margin $134,028 $194,293 $252,252
Gross Margin % 80.67% 80.44% 80.66%
Expenses
Payroll $50,063 $54,019 $60,387
Sales and Marketing and Other Expenses $2,300 $2,500 $2,500
Depreciation $0 $0 $0
Leased Equipment $0 $0 $0
Utilities $6,000 $6,000 $6,000
Insurance $2,400 $2,400 $2,400
Rent $60,000 $60,000 $60,000
Payroll Taxes $7,509 $8,103 $9,058
Other $0 $0 $0
Total Operating Expenses $128,272 $133,022 $140,345
Profit Before Interest and Taxes $5,755 $61,271 $111,907
EBITDA $5,755 $61,271 $111,907
Interest Expense $0 $0 $0
Taxes Incurred $1,727 $18,381 $33,572 Net Profit $4,029 $42,890 $78,335
Profit Maximizing Quantity:
Profit maximizing level of output is found by equating its marginal revenue with its marginal cost, which is the same profit maximizing condition that a perfectly competitive business uses to determine its equilibrium level of output. Marginal revenue equal marginal cost is used to determine the profit maximizing level of output of the company, and there is no impact on what the market structure is that the business operates in.
Pricing and Non-Pricing Strategy: When choosing to use pricing and non-pricing strategies it is a complex decision to be made. Depending on the market structure the strategy that is used varies. Since Krazy Kakes hold so much of the market on entertaining bakeries it is more a monopoly but by doing the expansion they move more into a market that oligopolistic. Non-pricing strategies work the best in a market that has minimal competition. The non-pricing strategies that Krazy Kakes would use to increase its customer base and revenues is by offering the new services so customers have access to the goods more readily, do advertising to make their company more known and push the product, and also making sure that they provide the best service to every customer at all times.

Barriers to Entry: Barriers to enter the market present challenges for new business to enter the market. The barriers that are put in place must be at a minimum to allow the market to be able to find price equilibrium and so that resources can be allocated properly. The barriers that are put in place help companies that are in the market by decreasing the competition, and preventing the market from becoming