*Once i get an estimate I can upload the sample T-Accounts that I have* The assignment states “You have been asked to help a former classmate and friend, Aria, as she starts a specialty bakery downtown. Specifically, she needs help playing costs, recording and reporting. The pertinent information is included in the linked document. You will be required to help Aria with:
* Cost classification
* Choosing a costing system
* Recording business transactions in t-accounts
* Reporting for the first month
* Break-even/ Target profit analysis
This assignment should be submitted in an Excel file with each requirement being entered on a separate tab. Please be cognizant that obviously shared files will receive no points.
Your work must be in Excel and be legible, clear, supported, and in a professional format, as you would want to present to your accounting department supervisor or CFO.
Each problem must be on no more than one page unless making it fit would make it unreadable.”
I am not sure how many “pages” are needed. I know it needs to be done on Excel and needs to have “tabs” created, as for how many tabs, I don’t know.
A&J BAKERY INC.
A SIMPLIFIED MANAGEMENT ACCOUNTING PROJECT
The objective of this project is to provide students with a practical application of some of the key concepts discuss in the managerial accounting course. It can be used as a half-semester long or concept driven project i.e., used along with the concepts/topics as they are introduced throughout the course.
Students should be able to:
1. Identify the various costs that are part of a business environment and the three elements of product cost
2. Differentiate between the different costing systems
3. Illustrate business transactions using T-account analysis
4. Prepare the statement of cost of goods manufactured and an income statement
5. Calculate the break-even point in units and dollars, and target sales in units and dollars
A&J BAKERY INC.
As she sat in her Accounting class bored while listening to the lecture on journal entries, Aria Jones could not imagine being an accountant in the future. As a young girl, she remembered sitting in the kitchen while her mom and aunts baked those delicious Rum cakes. She remembered that the cakes sold very quickly especially at Christmas time and that people were traveling from as far away as Florida to buy them. Her mom learned to bake from her mother, and she wrote down the cake recipes in case Aria or one of her siblings decided to follow in her footsteps. However, Aria chose to follow in her dad’s path and so she enrolled in college with plans to become an accountant. Her two older sisters where already studying to be a lawyer and a dentist.
Aria had an epiphany as she sat in class, she would leave school at the end of the semester to open up a bakery specializing in Jamaican black cakes. Aria anticipated that most of her business would be based on special order, customized cakes. She anticipated selling cakes for family weekend gatherings, birthday and wedding celebrations, and holiday gathering. She wanted to have a few cakes available in a store to appeal to the drop in customer.
In December 2019 Aria followed her plans; she dropped out of college, created a business plan, and incorporated as the A&J Bakery Inc. (A&J). The J is in honor of her mom Julia who passed away earlier in the year. Aria planned to open her business on January 1, 2021. She would use the $50,000 inheritance from her mom as start up capital and receive a minimal salary of $500 per month for the first year of business. Uncle David, a marketing executive with a national bank, agreed to provide her with marketing support pro-bono.
Aria found the perfect location for her business. A storefront on the busy intersection of Michigan and Grand River in Howell, MI after the owner retired. The landlord was impressed with Aria’s vision and agreed to pay for all renovations and charge her $600 per month for rent.
Her first action plan was to list all the key products or items that she would need to start the business. Aria’s list included a conventional oven, a cash register, baking pans, business licenses, health inspections, flour, sugar, baking soda, raisins, butter, eggs and rum. She also planned on hiring her accounting professor on a part time basis to perform bookkeeping services and her nieces Brianna and Alexis, to help her in the bakery. Aunt Sue Ellen would supervise the girls so that Aria could focus on developing the business. A&J’s cost drivers are provided in Table 1.
Required: Aria needs your help in classifying the various costs. In order to manage these costs, she wants them identified using the information below. She asked that you use Table 2 for your answers.
a) Behavior (fixed or variable)
b) Traceability (direct or indirect)
c) Financial reporting (product or period)
d) If product cost, identify which items are direct materials, direct labor or manufacturing overhead.
Aria discussed the business plan with her accounting professor who agreed to serve as her part time accountant. His first advice was for the business to develop a budget. Since Aria did not complete ACC 3200, she was not aware of the various costing systems that exist in businesses. Her accounting professor told Aria of the three different types of costing systems that exist in organizations – job order, process costing and activity based costing.
Required: Which type of costing system is A&J Bakery most likely to use? Discuss?
Aria spent the month of December talking to various suppliers in order to determine her cost structure. She added cost data to the information in Table 1.
A&J Bakery Inc. opened for business on January 1, 2020 as planned. During the month of January, the business purchased and used 200 pounds of flour, 200 pounds of sugar, 67 dozen eggs and had 4 bad eggs to dispose of during the month2, 20 baking soda boxes, 200 pounds of butter, 100 pounds of raisons, 50 bottles of rum, and the other ingredients (one box of each for a total of four) all from one supplier on account. Manufacturing overhead is applied to production at 4 dollars per cake. Aria purchased the oven using the start up capital and paid all salaries. Her nieces worked 300 hours in total for the month. January was a very good month for the bakery since it baked 200 cakes and sold all for cash. The average selling price was $50 per cake. All manufacturing overhead is closed out at month end. The supplier was paid at month end.
Required: Document A&J Bakery Inc January transactions using T-accounts (round all calculations to 2 decimal places) All other costs such as utilities, must be accounted for in the Taccounts (assume such transactions where applicable, are paid in cash) – 30 points
Since Aria was not paying much attention to the discussion on journal entries in her one accounting class, she does not understand the T-accounts that you provided. However, she heard through her accountant that there is a manufacturing report that would provide her with the same information as the T-accounts and is more user-friendly. She believes that the report is called the Statement of Cost of Goods Manufactured.
Required: Prepare the Statement of Cost of Goods Manufactured for January. Also, prepare an Income Statement for the month of January.
Breakeven Analysis/Target Sales
Although business was off to a good start in January, Aria realized that she will need to be profitable in order to continue as a viable business. Aria discussed the subject of profitability with her accountant who suggested that she first needs to determine her breakeven point in both unit sales and dollars. He explained to her that break even is the point where all costs are covered by sales and so, profit is equal to zero. He also suggested that the company should establish a monthly target profitability in order to determine the amount of cakes it would need to sell to achieve this level.
Since Aria did not know how to perform this calculation and in order to save money, she asked you to calculate the company’s breakeven point and the target sales need to achieve a monthly profit of $500.
Required: Calculate A&J Bakery Inc’s breakeven point in both units and sales dollars. Also, calculate the sales needed in order to achieve a monthly profit of $500. Note: Use four decimal places in converting from total to per unit cost.
Item and Ingredients Cost Standard per Cake
Conventional oven $6,000 (depreciated over 5 years on a SL basis No salvage value) n/a
Refrigerator $0 (provided by the landlord)
Baking pans, licenses $0 (paid for by dad) n/a
Baking flour $24 per 8 pounds bag 1 pound
Eggs $2 per dozen 4 eggs
Sugar $15 per 25 pounds bag 1 pound
Baking soda $6 per 14 pounds box
Butter $6.50 per 4 pounds 1 pound
Raisins $8 per 2 pounds ½ pound
Others (currants, diced date, nutmeg, molasses) –
$30 for all 4 boxes per month
Cash Register $12 per month (rental for 2 years)
Rum (alcohol) $12 per bottle ¼ qtr of bottle
Utilities (includes gas, electric and water) $50 per month
Mobile phone (business) $50 per month
Salary- Aria $500 per month
Salary – nieces $8 per hour 1 person 1.5 hours per cake
Salary-aunt $100 per month
Accountant $100 per month
Estimated MOH $4.00 per cake
TABLE 1: COST INFORMATION
Cost Classification Chart
Fixed Variable Direct Indirect Product DM DL MOH Period