#1, Managerial Accounting (20 points)

Below are costs for Chlos Cupcakes.

• Advertising $125/month
• Assistant baker $20/hour, 75 minutes per batch
• Butter $1.20/100 grams, 1250 grams per batch
• Chlos Salary* $70,000/year

(50% head baker, 50% store manager)

• Cupcake paper liners $5/batch
• Eggs $4/dozen, 2 dozen/batch
• Flour $8/kg, 3kg/batch
• Icing Sugar $3/kg, 2.5kg per batch
• Shop Rent* $1600/month

(60% bakery, 40% showroom/sales centre)

• Sugar $1.50/kg, 2kg/batch
• Utilities* $500/month

(75% bakery, 25% showroom)

• Website $100/month

On an average month, Chlo sells 3500 cupcakes (35 batches of 100 cupcakes). Using the selected data, determine the shops monthly;

1. direct materials
2. direct labour
3. manufacturing overhead
4. product costs
5. period costs
6. total costs

#2, Cost-Volume-Profit (20 points)

1. Based on answers in Q1, what does Chlo have to charge per cupcake to break even in an average month?
2. Prepare a 2-column CVP Income Statement for May 2022 if Chlo Cupcake sells 3500 units for $4 each (1 column for $, the other for %)
   1. What is Chlos Cupcakes profit margin in an average month?
   2. Does this seem healthy to you? Explain why or why not. There is no right/wrong answer, points will be granted based on how you back up your opinion.
3. What is the contribution margin per unit?
4. At a sale price of $4 per cupcake
   1. what is Chlos Cupcakes break-even sales units?
   2. What is their margin of safety (units)?
   3. What is their margin of safety (ratio)?
5. If Chlo wanted a target net income of $5000/month
   1. How many units would she have to sell at $4?
   2. How many units would she have to sell if she increases unit price to $4.50?

#3, Cost-Volume-Profit; Additional Issues (10 points)

Wanting to explore new revenue streams, Chlo decides to start selling gourmet cookies and she starts off this new venture by selling (on average) 750 cookies/month at $1.50 each. Variable costs per cookie are $0.55.

1. What is the sales mix percentage of units sold?
2. What is the weighted average contribution margin? Calculate 2 columns; one for $, one for %
   1. Based on this result, was this a good business decision for Chlo? Why or why not?
3. Assuming the fixed costs determined in 2b stay the same, what is the revised break-even point (units)?