Business Background

Rich watched his mom making cakes for the Jewish holidays since he was a kid. He even faked being sick so he could stay home and smell the delicious aroma of cinnamon, brown sugar and the yeast dough as it came out of the oven. Lots of people in the neighborhood came over before the holidays to put in their orders. Mom had learned from her mom and had all the recipes written on 3 x 5 index cards in case Rich or his brother wanted them.

Richs dad encouraged him to become an accountant because a profession would provide a solid income and career opportunities. The problem is, he hated Accounting. Well, maybe hate is too strong a word, but it wasnt what he enjoyed doing. He was a cook.

One day in Managerial Accounting class, Rich made a decision. He was going to quit school at the end of the semester and open up a bakery specializing in his moms cakes. He anticipated that most of his business would be based on special order, customized cakes. He figured he could service family weekend gatherings, birthday and weddings celebrations, and, of course, the Jewish New Year celebrations. Although most of the baking would be to order, he would maintain a limited inventory for drop in customers.

In December of 2016, he left school, created a business plan, and incorporated S & S Bakery. The plan was to open for business on January 1, 2017. He would use the $50,000 his dad left him when he passed away two years earlier as start up capital and pay himself a minimum salary of $500 month for the first year. His friend Maria, a marketing executive with her own firm, agreed to provide marketing support for a cake a year.

He found a location in Valencia close to a well known Hebrew school. The storefront was on Copperhill Drive, a busy street with a Starbucks and several restaurants. The landlord was impressed with his initiative and agreed to pay for all the leasehold improvements and charge $600 a month.

Cost Classification (Assignment #1)

The first item on his schedule was to list all the key products or items that he would need to start the business. His list included a conventional oven, a cash register, baking pans, butter, eggs, health inspection, business licenses, flour, sugar, baking soda, raisins, and cinnamon. His daughter Michelle and his niece Jennifer offered to help in the bakery. His friend Fern offered to supervise the girls so he could focus on business development. S & Ss cost drivers are provided in Table #1.

Required: Rich needs your help in classifying the various costs. He provided the information below to assist you in the identification. Use Table 2 for your answers.

Business Transactions (Assignment #3)

Rich spent the month of December talking to various suppliers in order to determine his cost structure. The results are listed in Table #1.

S & S opened on time in January. During the month they 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 the eggs is immaterial), 20 baking soda boxes, 200 pounds of butter, 100 pounds of raisins, and other ingredients (one box of each for a total of three) all from one supplier on account.

Manufacturing overhead is applied to production at $4 per cake. Rich purchased the oven using the startup capital and paid all the salaries. The girls worked 300 hours in total for the month. The first month was very good for the bakery as they baked and sold 200 cakes for cash. The average price was $50 per cake. All manufacturing overhead is closed out at the end of the month. The supplier was paid, in full, at the end of the month also.

Required: Document the bakerys transactions using T- accounts (round all calculations to 2 decimals). All other costs such as utilities must be accounted for in the T accounts (assume such transactions where applicable, are paid in cash).

Table 1

Table 2

This is what I have so far...

Requirement 1 . Rich needs your help in classifying the various costs. He provided the information below to assist you in the identification. 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.

Requirement 2 . Document the bakerys transactions using T- accounts (round all calculations to 2 decimals). All other costs such as utilities must be accounted for in the T accounts (assume such transactions where applicable, are paid in cash).

I need T-accounts for Manufacture Overhead, Acc Payable, S & A expense, Cash, Work in progress, Materials Inventory, Acc Depreciation, Sales, COGS, Finished Goods, and Salaries payable.

I have some of the transaction posted already but I want to make sure they are rigth.

ITEM AND INGREDIENTS Conventional Oven STANDARD PER CAKE n/a COST $6,000 (depreciated over 5 years on a SL basis - No salvage) $0 (provided by landlord) $0 (paid by dad) $24 per 8 lb. bag $2 dozen $15 per 25 lb. bag $6 per 14 lb. box $6.50 per 4 lb. $8 per 2 lbs. $30 for all 3 boxes per month $12 per month (rental for 2 years) $50 month Refrigerator Baking pans, licenses Baking flour Eggs Sugar Baking soda Butter Raisins Others (cinnamon, yeast, walnuts) Cash register 1 pound 4 eggs 1 lb. 1 lb. 12 lb. Utilities (includes gas, electric, and water) Mobile phone (business) Salary Rich Wages Michelle/en Salary Fern Accountant Estimated MOH $50 month $500 month $8 hr. $100 month S100 month 54 per cake 1 person - 1.5 hours Fixed COST CLASSIFICATION CHART Variable Direct Indirect Product DM DL MOH Period Description Oven Refrigerator Baking Pans Flour Eggs Sugar Baking Soda Butter Raisins Other Materials Cash Register Utilities Mobile Phone Rich Michelle/Jennifer Fern Accountant Business License Health Inspections Rent F G Beg Bal Michelle/Jennifer Direct Materials $4.779 00 COGM aking Soda $2.400.00 $1.579.00 S800.00 MOH Materials inventory $0.00 $600.00 $150 00 Indirect Materials $120 00 $1.579.00 Direct Materials $120.00 $12.00 $325.00 $400.00 $30.00 $0.00 $0.00 Ending Bal Beg Bal 10 ding Bal $0.00 $10.000.00 53.100 00 Salaries pay $50,000.00 $500.00 Rent 550 000 00 Oven Expense $50.00 Uits Expense $50.00 Mobile Phone $12.00 Cash Register $1,729.00 Direct and direct Materials 44 459.00 Accounts Payable S&A Expense Ending 17 . Bal 18h's Salary countant 20obile Phone Beg Bal 0.00 $100.00 $100.00 $50.00 $600.00 $12.00 $50.00 $912.00 23 sh Register 24tes Expense 25 ding Bal. Utilities Expense Mobile Phone Cash Register Rent $50.00 550.00 $12.00 $600.00 $50.00 Uutis expense $1.729 00 Direct & Indirect Materials $50.00 Mobile Phone $1200 Cash Register 300.00 Rent $1,729.00 Ending Bali 20 g. Bal king Pans 31obile phone 32 s. Licenses 33h Rregister Sites 35 Manufacturing Overhead $0.00 SR00.00 MOH $0.00 550.00 $0.00 $12.00 $50.00 S600.00 Beg Bal COGM Ending Bal. Finished Goods $0.00 $4.779.00 54.779.00 COGS $0.001 37 Wn's Salary preciation $100.00 $100.00 $912.00 $112.00 Accumulation Depreciaton $0.00 $800.00 Beg Bal ding Bal $100.00 Oven Depreciation $100.00 Ending Bal Salaries Payable $0.00 Beg. Bal $3.100.00 $500.00 Rich's Salary $10000 Fern's Salary $2400.00 Michellen Sal. $10000 Accountant $3,100.00 Ending Bal. 49ding Bal. 51 9. Bg $0.00 $10,000.00 Cakes sold $10.000.00 53 ding Bal COGS 56 57 . Bal DGM 54.779.00 50ding Bal. $4.779.00 ITEM AND INGREDIENTS Conventional Oven STANDARD PER CAKE n/a COST $6,000 (depreciated over 5 years on a SL basis - No salvage) $0 (provided by landlord) $0 (paid by dad) $24 per 8 lb. bag $2 dozen $15 per 25 lb. bag $6 per 14 lb. box $6.50 per 4 lb. $8 per 2 lbs. $30 for all 3 boxes per month $12 per month (rental for 2 years) $50 month Refrigerator Baking pans, licenses Baking flour Eggs Sugar Baking soda Butter Raisins Others (cinnamon, yeast, walnuts) Cash register 1 pound 4 eggs 1 lb. 1 lb. 12 lb. Utilities (includes gas, electric, and water) Mobile phone (business) Salary Rich Wages Michelle/en Salary Fern Accountant Estimated MOH $50 month $500 month $8 hr. $100 month S100 month 54 per cake 1 person - 1.5 hours Fixed COST CLASSIFICATION CHART Variable Direct Indirect Product DM DL MOH Period Description Oven Refrigerator Baking Pans Flour Eggs Sugar Baking Soda Butter Raisins Other Materials Cash Register Utilities Mobile Phone Rich Michelle/Jennifer Fern Accountant Business License Health Inspections Rent F G Beg Bal Michelle/Jennifer Direct Materials $4.779 00 COGM aking Soda $2.400.00 $1.579.00 S800.00 MOH Materials inventory $0.00 $600.00 $150 00 Indirect Materials $120 00 $1.579.00 Direct Materials $120.00 $12.00 $325.00 $400.00 $30.00 $0.00 $0.00 Ending Bal Beg Bal 10 ding Bal $0.00 $10.000.00 53.100 00 Salaries pay $50,000.00 $500.00 Rent 550 000 00 Oven Expense $50.00 Uits Expense $50.00 Mobile Phone $12.00 Cash Register $1,729.00 Direct and direct Materials 44 459.00 Accounts Payable S&A Expense Ending 17 . Bal 18h's Salary countant 20obile Phone Beg Bal 0.00 $100.00 $100.00 $50.00 $600.00 $12.00 $50.00 $912.00 23 sh Register 24tes Expense 25 ding Bal. Utilities Expense Mobile Phone Cash Register Rent $50.00 550.00 $12.00 $600.00 $50.00 Uutis expense $1.729 00 Direct & Indirect Materials $50.00 Mobile Phone $1200 Cash Register 300.00 Rent $1,729.00 Ending Bali 20 g. Bal king Pans 31obile phone 32 s. Licenses 33h Rregister Sites 35 Manufacturing Overhead $0.00 SR00.00 MOH $0.00 550.00 $0.00 $12.00 $50.00 S600.00 Beg Bal COGM Ending Bal. Finished Goods $0.00 $4.779.00 54.779.00 COGS $0.001 37 Wn's Salary preciation $100.00 $100.00 $912.00 $112.00 Accumulation Depreciaton $0.00 $800.00 Beg Bal ding Bal $100.00 Oven Depreciation $100.00 Ending Bal Salaries Payable $0.00 Beg. Bal $3.100.00 $500.00 Rich's Salary $10000 Fern's Salary $2400.00 Michellen Sal. $10000 Accountant $3,100.00 Ending Bal. 49ding Bal. 51 9. Bg $0.00 $10,000.00 Cakes sold $10.000.00 53 ding Bal COGS 56 57 . Bal DGM 54.779.00 50ding Bal. $4.779.00