Ned Hilly was an investment banker and worked in San Francisco at a large bank. As retirement got closer his wife, Sally, and him decided to spend their retirement up in the Sierra Nevada foothills by buying an apple farm in Apple Hill. All their kids were grown and their youngest daughter, Nikki, was finishing an accounting degree at Sac State, whom they were hoping would help them out with the books once she was done. A few years go by and the farm life is bustling. They had a U-Pick your own apples at the farm which cut down costs of running the farm, though they ended up with more apples than they could sell that first year. The second year, Sally came up with the idea of opening a bakery on the farm. She was an excellent baker; she makes the best apple pie west of the Mississippi, at least her family thought so. The bakery was a success that year, more so than expected. Sally made homemade apple pies and caramel apples with her special caramel sauce. In the following year, they expanded bakery operations to include more staff and an extra space for baking. Ned wasnt too sure if the expansion was going to be profitable, he had an idea of the costs involved with apple pie and caramel apple production, but he couldnt pinpoint the details. Since Apple Hill is a seasonal business he wanted to know how well his business did in the peak season to ensure that it made enough to cover the costs in the off-season. Luckily, Nikki just graduated in May and she would be able to work with Ned to work out the details and come up with some possible advice and solutions to his questions. Nikki started by talking with her parents about some of the estimated sales and costs that they thought would incur for the month of September. Here are some of those estimates: Total Apple Pies Caramel Apples Sales price (per unit) $22.00 $8.00 Expected sales units (for September) 15,000 6,000 9,000 Expected Manufacturing costs: Total Apple Pies Caramel Apples Fixed OH (per month) $20,150.00 $16,500.00 $3,650.00 Direct labor (per unit) $3.50 $2.10 Direct materials (per unit) $2.50 $1.75 Variable OH (per unit) $2.00 $0.75 Expected Marketing and admin costs: Fixed costs (per month) $5,750.00 $4,500.00 $1,250.00 Variable costs (per unit) $1.25 $0.25 Additionally, Sally informed her that the farm received a special order to sell their apple pies and caramel apples at the local county fair in September. Sally wanted to sell 3,250 pies and 4,250 caramel apples for a discounted price of $18.00 and $6.50, respectively. With, the amount of staff and the size of the bakery, Nikki determined that the maximum capacity for the bakery is 3,700 labor hours a month. At the current projected sale amounts she expects that theyll need 2,850 hours to meet their regular sales volume. After review of the salaries of all the staff, Nikki determined that the average hourly wage was $14.00. Ned was also concerned about how much it cost to keep apple pie inventory on hand at the end of the month, caramel apples should be sold within a couple days so no inventory is left at the end of the month. Since there is a limited shelf life for the apple pies, Ned and Sally try and keep the ending inventories in line with next months expectations. They estimated that theyd have to start 7,000 apple pies in order to have 1,000 apple pies in-process at the end of the month and 500 finished pies. At the end of August there were 500 pies that were in-process and no finished pies. The variable costs associated with these inventories were as follows: DM Conversion Beginning WIP inventory $1,400 $3,350 September costs $17,500 $38,500 And the conversion cost for the in-process pies is 50% completed and 100% for direct materials. (Use the expected for September Apple Pie Sales for determining units started and units completed and transferred out) September was a success for the bakery! They were able to complete the special order and with some overtime baked a few more pies. Here were the results for the actual sales and costs at the end of the month. (The actuals as presented below are only to be use for Problem 6.) Total Apple Pies Caramel Apples Actual Sales price (per unit) $22.50 $7.00 Actual sales units 17,750 7,250 10,500 Actual variable manufacturing OH $81,625 Actual variable marketing and admin cost $15,125 Actual fixed manufacturing costs $18,000 Actual marketing and admin costs $5,000 Problems 1. For Apple Pies only, compute the variable manufacturing costs per unit, full unit cost per unit, variable cost per unit, full absorption cost per unit, prime cost per unit, conversion cost per unit, profit margin per unit, contribution margin per unit, and gross margin per unit. 2. Calculate the total profit expected for September, compute the weighted average contribution margin, and compute the breakeven in units. 3. Calculate the labor hours needed for the special order, calculate the incremental profit/(loss) for the special order, calculate the capacity available for regular orders, compute the contribution margin per hour for regular orders, compute the contribution margin lost from regular sales orders, calculate the total contribution margin including the special order. 4. Prepare the journal entries as given on the excel workbook. 5. Using the Weighted-Average method create the Production Cost Report for Apple Pies only, to include computing the total Apple Pies to be accounted for, computing the total Apple Pie costs to be accounted for, and calculating any necessary adjustments. 6. Create a Budget Analysis Report for the month of September, to include creating a Master Budget, and calculating the variance analyses between Actuals versus the Flexible Budget and versus the Master Budget. Note those variances as either being Favorable (F) or Unfavorable (U).