Situation

You are the Head Accountant at Cocos Cookies Company. Cocos Cookies is expanding and to help planning and monitor the expansion, you have been asked to prepare a master budget. The fiscal year is January 1 to December 31^st.

To help you prepare the budget you need to understand the companys cost structure and relationship between revenues, costs and profits.

Required

Read the information provided.

Part A

1. Find a cookie recipe. This will help you with the cost of raw materials and will be submitted.

2. Use the cookie recipe to determine the amount of ingredients required for one dozen cookies.

3. Use Exhibit 1 for the cost of the ingredients, manufacturing overhead, and operating expenses.

4. If your recipe has ingredients that are not included in Exhibit 1, these ingredients are considered part of overhead.

5. Calculate in Excel the following:

Total variable costs per dozen cookies

Sales price per dozen cookies using markup on variable costs

Contribution margin per dozen cookies

Breakeven point for 1 fiscal quarter in dollars and in units

Answer the following:

1. Explain the differences between raw materials, manufacturing overhead, and operating expenses.

2. Explain what the difference between categorizing costs as fixed or variable.

Part A is 5 to 7 pages including calculations