Answered: inal report to Tracy will be two fold. You are to write at least a one page paper to Tracy offering her your expertise on her expanding business. You have…

FINANCIAL ACCOUNTING

10th Edition

ISBN: 9781259964947

Author: Libby

Publisher: MCG

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Question

Your final report to Tracy will be two fold. You are to write at least a one page paper to Tracy offering her your expertise on her expanding business. You have helped her determine the cost per cupcake, a budget, performed variance analysis, and looked at the return on investment if she is thinking of expanding her business.

Your next task is to create a traditional income statement and a variable income statement for Tracy. She would like to know what her breakeven point in units and sales dollars currently are. She would also like to know what amount of sales are required to achieve a target profit of $40,000 and also the units to sell to meet that target profit.

		# of Cupcakes	110,000
		Price Per Cake	$2.28
Raw materials	Variable	$42,244	All are purchased as needed to avoid spoilage and to have the freshest ingredients	DM	$0.38
Bakery wages	Variable	$58,000	They do all of the baking	DL	$0.53
Supervisor’s salary	Fixed	$35,000	Supervisor does not do any baking, but supervises the bakers	VFO	$0.17
Office personnel	Fixed	$26,000	Office personnel do not do any baking	FFO	$0.40
Tracy’s salary	Fixed	$42,000	She considers herself CEO	Cost per cupcake	$1.48
Salesman's salary	Variable	$23,500	He is paid based on number of cupcakes sold to special events
Supplies	Variable	$5,000	All used in the bakery	Factory Overhead		Period Costs
Utilities (electric)	Variable	$6,500	75% is for the bakery and 25% is for the administrative office	Supervisor’s salary	$35,000		Office personnel	$26,000
Utilities (Gas) for ovens	Variable	$5,250	All for bakery	Supplies	$5,000		Tracy’s salary	$42,000
Water	Variable	$3,800	All for bakery	Utilities (electric)	$4,875		Salesman's salary	$23,500
Repairs and maintenance	Fixed	$4,700	All for bakery	Utilities (Gas) for ovens	$5,250		Utilities (electric)	$1,625
Rent expense	Fixed	$6,000	75% is for the bakery and 25% is for the administrative office	Water	$3,800		Rent expense	$1,500
Telephone and internet	Fixed	$4,000	All for administrative office	Repairs and maintenance	$4,700		Telephone and internet	$4,000
	Total	$261,994		Rent expense	$4,500		Total	$98,625
				Total	$63,125