Question

You have been invited to participate in an accounting competition. Your team will be making a presentation to Michelle and Vishayla who are sister's-in-law who have recently opened a bakery specializing in cakes. They realized their love of baking after they married brothers, Josh and Cody. For a few years they created cakes for family and friends. The demand for their cakes had grown to the point where they could no longer use their kitchens as their "bakery." They rented a store front on the Boulevard in Colonial Heights that used to be a diner. It had a kitchen that was converted into a bakery with large ovens, mixing bins, and prep/decorating area. The owner made all the conversions for the bakery. They currently sell to individuals, area local stores, and event centers for parties/weddings. To get their growing business off the ground they hired a supervisor and two wage employees who work as orders are received. The rest of their payroll includes a financial accountant and one office staff who prepare invoices and does other office duties. They have also hired a sales person who is paid based on the number of cakes sold. Of the store front they have rented, 80 % is used as the bakery and 20 % is used as office space. Your assignment is two-fold: 1. They have asked your team to prepare managerial accounting data of their current operation. They know the amount of ingredients in each cake but do not know how much labor to add to the cost and the amount of overhead to allocate to each cake. The accountant they have hired is good at preparing financial statements they need to give to the bank and prepare taxes and payroll but is not a managerial accountant and is not able to help. They need to know the cost per cake in order to be able to calculate their cost of goods sold. A list of the calculations they would like for you to prepare for them, as well as, information concerning next period's operations is on the following page. 2. Michelle and Vishayla are thinking of expanding their operations. They want to build a new bakery that will allow them to expand their operation. The new building will allow them to add more ovens, larger prep and decoration stations, and be able to open a retail store in the front of the building. A piece of land is available close to Fort Lee which will give them greater access to military and civilian personnel. They want your team to determine the feasibility of this new venture. The needed calculations and relevant data are on the following pages.

Requirements 1-4

Answer 1

In the above Question , asked for answer Q1-4 and please see below step by step answer , Source - mentioned as per Q( Mean as per Question )

Derived number also formula based update into workings

Task 1
Need to know Cost per Cake
They need to calculate Cost of goods sold
They feel the Direct Labour Hr will be the best way to
allocate Manufacturing Overhead
Wages Emplyoee $/hr	10
	Source - As per Q	Source - As per Q	Derived No
	Direct Labour Hr / Cake	Wages $/hr	Wage cost($)
1 tier Wedding Cake	4	10	40
2 tier Wedding Cake	6	10	60
3 tier Wedding Cake	8	10	80
Large Sheet Cake	4	10	40
Medium Sheet Cake	3	10	30
Small Sheet Cake	1.5	10	15
Total ($)			265	Source
Raw Materail Cost ($)			79,125	As per Q
SalesMan Salary($)			18,000	As per Q
Supplier($)			1,500	As per Q
Utilities ( 85% as Variable )($)	2600*85%		2,210	As per Q
Utilities ( Gas to Oven )($)			1,750	As per Q
Rent Expenses( 80% Variable)	12000*80%		9600	As per Q
Water($)			600	As per Q
Total Variable cost($) (a)			1,13,050
Fixed Cost
Bakery Wages($)			1,29,750	As per Q
Administrative Salaries($)			65,000	As per Q
Michelle and Vishyala's Salary($)			40,000	As per Q
Repair & Maint($)			2,300	As per Q
Rent Expenses( 20% fixed)($)	12000*20%		2400	As per Q
Telephone & Internet($)			1,200	As per Q
Utilities ( 15% as fixed )($)	2600*15%		390	As per Q
Total Fixed cost($) (b)			2,41,040
Total Cost(a+b) $ ( c)			3,54,090

Above workings will help to derive Q1 - cost per cake ( as below)  

Total Sales Unit ( source as per Q)
1 tier Wedding Cake	125
2 tier Wedding Cake	300
3 tier Wedding Cake	325
Large Sheet Cake	500
Medium Sheet Cake	600
Small Sheet Cake	850
Total Sales Unit (d)	2700
Cost per unit of cake (c)/(d)( derived Number)	131.14

Answer no Q2 - Q4 as below :  

Margin ($) Calculation
	Source - As per Q	Source - As per Q	Derived No
	Sales Unit	Selling Price / Cake($)	Sale Value($)
1 tier Wedding Cake	125	200	25,000
2 tier Wedding Cake	300	350	1,05,000
3 tier Wedding Cake	325	400	1,30,000
Large Sheet Cake	500	125	62,500
Medium Sheet Cake	600	90	54,000
Small Sheet Cake	850	65	55,250
Total Sale Value ($) (e)			4,31,750
Less - Variable Cost ( as calculated above)(a)$			1,13,050
Contribution(e-a) $			3,18,700
Less Fixed Cost			2,41,040
Margin ($)			77,660( And Q2)
Sales Unit ( d) ( as above )			2,700
Contribution Per Unit ($) ( g)			118
Unavoidable Fixed cost ($) ( as above)(h)			2,41,040
Break Even Point in dollar(g/h)			2,042(AnsQ3)
Target Profit in dollars for a Profit ($)			1,25,000
Fixed Cost( as above )			2,41,040
Target Profit ( $) ( as above)			1,25,000
Contribution Per Unit			118
Target Sales in dollar ($)- (Fixed cost+Target Profit)/ Contribution per unit			(241040+125000)/118
Target Sales in dollar in Unit			3,102(AnsQ4)