Using the Humble Pies Case Study details and financials: 1. Compute the Margin of Safety using...
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Using the Humble Pies Case Study details and financials: 1. Compute the Margin of Safety using the financials (10 points) 2. Compute the Contribution Margin (all 3)(10 points) 3. Develop a Contribution Margin Income Statement(15 points) 4. Analyze and Compute the Break-Even Point in units and sales Dollars... Which is better for this situation and why? (15 points) 5. Analyze and Compute the Target Profit for $189.000 (or Target Income) (100 points) Table 1: Selected Financial Data (actual cost and revenue data for May 2014) Behavior May 2014 $766,667 Cost Category Sales Expenses: Raw Materials Bakery labor. Administration Salaries Supplies Freight & Shipping-In Freight & Shipping-Out Utilities Electricity Utilities-Gas (ovens) Water Repairs & Maintenance Rent expense Telephone & Internet Co-owners' salary Brokers' commissions Total Expenses Operating Profit Income Tax Net operating income Unit volume Average Operating Assets Minimum Rate of Return Variable Mixed Fixed Variable Variable Variable Variable Variable Variable Fixed Fixed Fixed Fixed Variable $327,934 $158,767 $41,367 $3,833 $4,907 $64,707 $9,813 $3,067 $920 $4,293 $19,167 $2,300 $25,300 $30,667 $697,042 $69,625 $22,280 $47,345 64,500 $5,500,000 8.00% Notes to Selected Financial Data Raw Materials: Includes main ingredients and flavor additives. Main ingredients are relatively higher cost items such as flour, sugar, eggs, nuts and fruit that appear on the package label. Flavor additives are relatively low-dollar cost items and a small part of the weight of the pie such as spices, dyes, salt, and certain oils that don't always appear on the package label. Bakery labor: The cost amount consists of 22% supervisory salaries and taxes and the rest hourly workers. Bakery labor workers are organized into four categories: production line (mixing, filling and baking), packaging, sanitation and warehouse (all included as part of cost of goods sold). Administration Salaries: Includes taxes and benefits for the Vice President of Operations, the Controller, Human Resources Manager and two administrative support people. Supplies: Includes supplies relating to production, packaging and decorating, sanitation and warehouse (think: adhesive, pastry bags, spatulas, scrapers, icing pens, gloves and so on). Freight & Shipping-In: The costs of shipping raw ingredients and other materials to the factory from suppliers. Freight & Shipping-Out: The costs of shipping finished products to customer locations and distribution centers. Utilities Electricity: Approximately 10% for administrative office and the remainder for the factory. The factory portion varies somewhat with production volume. Utilities Gas (ovens): Approximately 5% for administrative office and the remainder for the factory. The factory portion varies somewhat with production volume. Water: All for the factory and varies proportionately with production volume. Repairs & Maintenance: All for the factory. Rent expense: The factory uses about 85% of the total square footage of the building and the remainder is for the administrative office. Telephone & Internet: All for the administrative office. Co-owners' salary: Linda Jackson and Taylor Johnson. Brokers' commissions: Generally 4% of sales. Income Tax: Average total tax rate is 32%. Using the Humble Pies Case Study details and financials: 1. Compute the Margin of Safety using the financials (10 points) 2. Compute the Contribution Margin (all 3)(10 points) 3. Develop a Contribution Margin Income Statement(15 points) 4. Analyze and Compute the Break-Even Point in units and sales Dollars... Which is better for this situation and why? (15 points) 5. Analyze and Compute the Target Profit for $189.000 (or Target Income) (100 points) Table 1: Selected Financial Data (actual cost and revenue data for May 2014) Behavior May 2014 $766,667 Cost Category Sales Expenses: Raw Materials Bakery labor. Administration Salaries Supplies Freight & Shipping-In Freight & Shipping-Out Utilities Electricity Utilities-Gas (ovens) Water Repairs & Maintenance Rent expense Telephone & Internet Co-owners' salary Brokers' commissions Total Expenses Operating Profit Income Tax Net operating income Unit volume Average Operating Assets Minimum Rate of Return Variable Mixed Fixed Variable Variable Variable Variable Variable Variable Fixed Fixed Fixed Fixed Variable $327,934 $158,767 $41,367 $3,833 $4,907 $64,707 $9,813 $3,067 $920 $4,293 $19,167 $2,300 $25,300 $30,667 $697,042 $69,625 $22,280 $47,345 64,500 $5,500,000 8.00% Notes to Selected Financial Data Raw Materials: Includes main ingredients and flavor additives. Main ingredients are relatively higher cost items such as flour, sugar, eggs, nuts and fruit that appear on the package label. Flavor additives are relatively low-dollar cost items and a small part of the weight of the pie such as spices, dyes, salt, and certain oils that don't always appear on the package label. Bakery labor: The cost amount consists of 22% supervisory salaries and taxes and the rest hourly workers. Bakery labor workers are organized into four categories: production line (mixing, filling and baking), packaging, sanitation and warehouse (all included as part of cost of goods sold). Administration Salaries: Includes taxes and benefits for the Vice President of Operations, the Controller, Human Resources Manager and two administrative support people. Supplies: Includes supplies relating to production, packaging and decorating, sanitation and warehouse (think: adhesive, pastry bags, spatulas, scrapers, icing pens, gloves and so on). Freight & Shipping-In: The costs of shipping raw ingredients and other materials to the factory from suppliers. Freight & Shipping-Out: The costs of shipping finished products to customer locations and distribution centers. Utilities Electricity: Approximately 10% for administrative office and the remainder for the factory. The factory portion varies somewhat with production volume. Utilities Gas (ovens): Approximately 5% for administrative office and the remainder for the factory. The factory portion varies somewhat with production volume. Water: All for the factory and varies proportionately with production volume. Repairs & Maintenance: All for the factory. Rent expense: The factory uses about 85% of the total square footage of the building and the remainder is for the administrative office. Telephone & Internet: All for the administrative office. Co-owners' salary: Linda Jackson and Taylor Johnson. Brokers' commissions: Generally 4% of sales. Income Tax: Average total tax rate is 32%.
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Financial Accounting
ISBN: 978-0078025549
3rd edition
Authors: J. David Spiceland, Wayne Thomas, Don Herrmann
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