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 breakeven is the point where all costs are covered by sales and 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 needed to achieve a monthly profit of $700. Required: Calculate K&J Bakery Inc's breakeven point in both units and sales dollars. Also calculate the sales needed in order to achieve a monthly profit of $700. Note: Use four decimal places in converting from total to per unit cost. 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 $6 per 14 pounds box $6.50 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 2 pound $30 for all 4 boxes per month $12 per month (rental for 2 years) | $12 per bottle $50 per month 14 qtr of bottle Rum (alcohol) Utilities includes gas, electric and water Mobile phone (business) Salary-Keisha Salary - nieces $50 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 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 breakeven is the point where all costs are covered by sales and 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 needed to achieve a monthly profit of $700. Required: Calculate K&J Bakery Inc's breakeven point in both units and sales dollars. Also calculate the sales needed in order to achieve a monthly profit of $700. Note: Use four decimal places in converting from total to per unit cost. 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 $6 per 14 pounds box $6.50 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 2 pound $30 for all 4 boxes per month $12 per month (rental for 2 years) | $12 per bottle $50 per month 14 qtr of bottle Rum (alcohol) Utilities includes gas, electric and water Mobile phone (business) Salary-Keisha Salary - nieces $50 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
