Usage of Decorator pattern in baking program
You missed a somewhat crucial point in the pattern: the decorator must present the exact same interface as the decorated object.

In other words, any IBake decorator should also implement the IBake interface, so that it's possible to decorate a cake with both cream and cherries!

Here's your CreamDecorator, fixed:

class CreamDecorator : IBake
    {
        public static readonly decimal ExtraCharge = 50;
        private readonly IBake _decorated;

        public CreamDecorator(IBake decorated)            
        {
            _decorated = decorated;
        }

        public string Name
        {
            get
            {
                var name = _decorated.Name;
                return name + " +Cream";
            }
        }

        public double Price
        { 
            get
            {
                var price = _decorated.Price;
                return price + ExtraCharge;
            }
        }
    }


The idea is that you call the decorated code, and then decorate the result before returning it.



Also since we're talking about money, double is a bad choice of a type for Price. IBake should look like this:

public interface IBake
{
    string Name { get; }
    decimal Price { get; }
}




As for the wrong price being output, there's your bug:

public string GetCakeCost()
{
    return "Normal cake is:" + m_Price + "and Tax is: " + (this.m_Price * 0.08f);
}


The base class doesn't know whether it's decorated or not, and shouldn't make that assumption, it's just another implementation of the IBake interface:

public static readonly decimal TaxRate = 0.08;

public string GetCakeCost()
{
    return string.Format("Price: {0:C2}\nTax: {1:C2}\nTotal: {2:C2}", Price, Price * TaxRate, Price * (1 + TaxRate));
}


Now that looks cleaner, but it's also flawed: Cost is a bad/confusing term, should be Price, SellingPrice, or TotalPrice - Cost could refer to what the bakery is paying to produce the cake, and would be used to calculate profits and gross margins. The tax rate shouldn't be hard-coded into a method that returns a string either.

Another problem is that the decorator would need to override the Price property for the base class to return the correct figure, and that's not how decorators work.

One solution could be to include a TaxAmount member in the IBake interface, and a separate member to return a string representation of the cake's price, which I'd call PriceDetails:

public interface IBake
{
    string Name { get; }
    decimal Price { get; }
    decimal TaxAmount { get; }
    string PriceDetails { get; }
}


The base cake could do it like this:

public decimal TaxAmount 
{ 
    get { return TaxRate * Price; } 
}

public string PriceDetails
{
    get { return return string.Format("{0}\nPrice: {1:C2}\nTax: {2:C2}\nTotal: {3:C2}", Name, Price, TaxAmount, Price + TaxAmount); }
}


And then the decorators have nothing to change about these two, so they just call the decorated code:

public static readonly decimal ExtraCharge = 50;

public decimal TaxAmount
{
    get { return _decorated.TaxAmount; }
}

public string PriceDetails
{
    get { return _decorated.PriceDetails; } // add an "Extra" in the detail line?
}


At the end of the day, what you want to ensure is that the client code is always calling into the decorated instance - that's why it's important for decorators to present the same interface as the decorated type, and for all members to be accessed by the client code via that interface.

Here's what your client code could look like in a production application:

public class CakeOrderLine
{
    private readonly IBake _cake;
    public CakeOrderLine(IBake cake)
    {
        _cake = cake;
    }

    public override string ToString()
    {
        return _cake.PriceDetails;
    }
}


An "order line" is injected with an IBake instance, but has no clue how/if it's decorated, it treats all implementations of IBake equally.

Your console client could do this:

var cake = new BakeBase();
var cherryCake = new CherryDecorator(cake);
var creamCherryCake = new CreamDecorator(cherryCake);


And then this:

Console.Write("{0:C2}\n", cake.PriceDetails);
Console.Write("{0:C2}\n", cherryCake.PriceDetails);
Console.Write("{0:C2}\n", creamCherryCake.PriceDetails);


Should output something like this, assuming Price is implemented as above:

Cake Base
Price: $200.00
Tax: $16.00
Total: $216.00

Cake Base +Cherry 
Price: $250.00
Tax: $20.00
Total: $270.00

Cake Base +Cherry +Cream
Price: $350.00
Tax: $28.00
Total: $378.00




I'm not a UML-ist, I think this fairly represents the concept:



See the full code here.