Ava and Taylor spent the month of December talking to various suppliers in order to determine their cost structure. They added cost data to the information in Table 1. Specialty Cakes Inc. opened for business on January 1, 2023 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 month (the cost of these eggs are immaterial), 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. The company purchased the oven using the startup 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 Specialty Cakes Inc January transactions using T-accounts and journal entries (round all calculations to 2 decimal places) All other costs such as utilities, must be accounted for in the T-accounts (assume such transactions where applicable, are paid in cash). -30 points. Reporting (Requirement \#4) The accounting professor told Ava and Taylor that it necessary to prepare a manufacturing report that would provide 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 Cast of Goods Manufactured for January. Also, prepare the Income Statement for the month of January. -20 points. Breakeven Analysis/Target Sales (Requirement \#5) Although the business was off to a good start in January, Ava and Taylor realized that the business will need to be profitable in order to continue as a viable business. Ava discussed the subject of profitability with her accounting professor who suggested that they first need to determine the breakeven point in both unit's sales and dollars. She explained to them that breakeven 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 Ava and Taylor 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 achicve a monthly profit of $500. Required: Calculate Specialty Cakes 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 toral to per unit cost. 30 points. Business Transactions (Requirement \#3) Ava and Taylor spent the month of December talking to various suppliers in order to determine their cost structure. They added cost data to the information in Table 1. Specialty Cakes Inc. opened for business on January 1, 2023 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 month (the cost of these eggs are immaterial), 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. The company purchased the oven using the startup 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. Business Background Special Cakes, Inc. is the genius of two college roommates, Ava and Taylor who graduated with an Accounting and Management degree. They recall the time sitting in the Accounting II class bored while listening to the lecture on cost management. The both had dreams of becoming an accountant in the future. The two have lived successful lives working for big accounting firms, however, they both had love for food (especially cakes) by landing jobs at one of the finest bakeries in the City of Colleges. A chance encounter back in 2020 reunited the two and got them talking of their mutual love of food and what they have learned while working for the bakery. Soon they were spending their free time crafting quirky but sophisticated (not to mention delicious) cakes - passing them out to friends and family, and building a fan based on social media. When the production outgrew the home kitchen, Ava and Taylor created a business plan, and incorporated as the Special Cakes, Inc. They plan to open the business on January 1 , 2023. Ava and Taylor would use the $50e000 savings and each receive a minimal salary of $500 per month for the first year of business. Another colfeague, a marking executive with national bank, agreed to provide her with marketing support pro-bono. They found the perfect location for their business. A take-out restaurant on the busy street of Oak Street in Conway, AR, became available after a bitter divorce between the owners. The landlord was impressed with their vision and agreed to pay for all renovations and charge them $600 per month for rent
