Dropped off a cake this morning and when transferring to her car I noticed the cake shifted during delivery. She said it was fine, I told her to shift the middle tier back in place when she got home. Well she got home and told me that when she was taking the cake out of the box the whole back side of the cake had split and it kind of smooshed in on itself.  I offered her cupcakes in exchange.  There’s no way I have time to re-make a three tiered cake with all of the decorations in detail that I had and I had already under charged her for the cake (my fault not hers). My question is should I refund some of the money that she paid me for the cake or should I make the cupcakes and leave it at that?

If I am understanding correctly, the cake had already shifted when the cake was delivered to the customer.  Even though she said it was fine, I feel that a partial refund is in order.  We they able to eat any of the cake?

i would refund a lot -- probably all of it 

Cupcakes would not work for me had I ordered a special 3-tier cake for an occasion and that happened. Whether I could eat it or not, I certainly couldn't present it to anyone and use it for its intended purpose. It sucks that it happened, but I also agree to refund in full. 

yes and i'm really sorry that happened -- 

I agree with the full refund suggestion. Cupcakes are not equal to a 3 tiered decorated cake. 

I also agree with all the others on this.  It's hard to have to refund $$ but there are times when it just has to be done - and this is one of them.