assignment #5

Breakeven Analysis/Target Sales (Assignment #5) Although business was off to a good start in January, Keisha realized that she will need to be profitable in order to continue as a viable business. Keisha 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 Keisha 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 K&M 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. 50 points Keisha 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 K & M Bakery Inc. opened for business on January 1, 2021 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, 20 baking soda boxes, 200 pounds of butter, 100 pounds of raisins, 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 S4 per cake. Keisha 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 Standard per Cake n/a n/a 1 pound 4 eggs I pound Item and Ingredients Cost Conventional oven $6,000 (depreciated over 5 years on a SL basis No salvage value) Refrigerator SO (provided by the landlord) Baking pans, licenses SO (paid for by dad) Baking flour S24 per 8 pounds bag Eggs $2 per dozen Sugar $15 per 25 pounds bag Baking soda $6 per 14 pounds box Butter S6.50 per 4 pounds Raisins 58 per 2 pounds Others (currants, diced date, nutmeg, molasses) $30 for all 4 boxes per month Cash Register $12 per month (rental for 2 years) Rum (alcohol) S12 per bottle Utilities (includes gas, electric S50 per month and water) Mobile phone (business) $50 per month Salary-Keisha $500 per month Salary-nieces S8 per hour 1 pound 22 pound Vaqtr of bottle 1 person 1.5 hours per cake Salary-aunt Accountant Estimated MOH S100 per month $100 per month $4.00 per cake