5. Calculate the break-even point in units and dollars, and target sales in Unns an un SWEET CONFECTIONS BAKERY INC. Business Background As she sat in her Accounting class bored while listening to the lecture on journal entries, Ava Smithfield 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 and decorated beautiful delicious 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 Ava or one of her siblings decided to follow in her footsteps. However, Ava chose to enroll in college with plans to become an accountant. Ava had an idea as she sat in class and decided to open up a bakery specializing in decorated cakes. Ava anticipated that most of her business would be based on special order, customized cakes. She anticipated selling cakes for birthday and wedding celebrations, and holiday gatherings. She wanted to have a few cakes available in a store to appeal to the drop in customer. In December 2019 Ava followed her plans; she dropped out of college, created a business plan, and incorporated as Sweet Confections Bakery, Inc. Ava planned to open her business on January 1, 2021. She would use a50,000 inheritance as start-up capital and receive a minimal salary R$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. Excel Ava found the perfect location for her business. A storefront on the busy street Washtenaw Avenue in Ann Arbor, MI. The landlord was impressed with her vision and agreed to pay for all renovations and charge her($600 per month for rent. Cost Classification Tablet Ava's first action plan was to list all the key products or items that she would need to start the business. The 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 Ava could focus on developing the business. The business' cost drivers are provided in Table 1. Required (worth 50 points): Ava 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. TABLE 1: COST INFORMATION Item and Ingredients Conventional oven Standard per Cake n/a Cost $6,000 (depreciated over 5 years on a SL basis No salvage value) SO (provided by the landlord) SO (paid for by dad) $24 per 8 pounds bag $2 per dozen $15 per 25 pounds bag S6 per 14 pounds box S6.50 per 4 pounds $8 per 2 pounds Refrigerator Baking pans, licenses Baking flour Eggs Sugar Baking soda Butter Raisins Others (currants, diced date, nutmeg, molasses) Cash Register n/a 1 pound 4 eggs 1 pound | 1 pound % pound $30 for all 4 boxes per month S12 per month (rental for 2 years) $12 per bottle $50 per month qtr of bottle Rum (alcohol) Utilities includes gas, electric and water) Mobile phone (business) Salary- Ava Salary - nieces S50 per month $500 per month $8 per hour 1 person 1.5 hours per cake Salary-aunt Accountant Estimated MOH $100 per month $100 per month $4.00 per cake Table 2 Cost Classification Chart Fixed Variable Direct Indirect Product DM DL MOH Period Oven Cash Register Baking pans Business License Health Inspections Rent Utilities Mobile Phone Flour Sugar Baking Soda Butter Raisons Eggs Rum Others Accountant Brianna Alexis Ava Aunt Ellen