Sweet Wave Bakery (SWB) is a private corporate that was formed to provide cakes, breads and other sweets to commercial businesses and private individuals. It is located in Chicago, IL and manufactures the products in the home location and ships the product to retail outlets across the United States. It also has a division that provides onsite bakery installation and warranty services.

SWB’s mission is to provide high-quality bakery products to satisfy their customer's needs and to be recognized as a positive impact in the community. Because of its quality products and community involvement, the company has been growing quickly and is always looking for ways to expand its product line and continue to grow while still remaining profitable.

Sweet Wave Bakery was founded by Sally Wasterton who is the company president and CEO. Sally’s brother, Mark, has been working with Sally from the beginning developing new ideas and new recipes for the bakery. Mark is the Vice President of the company with Rolando Garras acting as the factory manager. Rolando is responsible for hiring line managers in the Chicago plant and Vice President Laila Jackson is responsible for the local divisions that install bakery equipment. SWB has a centralized human resources department that is managed by Pat Wilmington. The CFO of the organization, Rebecca Martinez, is in charge of the accounting and finance department. Rebecca has a small staff of CPA’s working for her.

The following has been pulled from the financial records of Sweet Wave Bakery for the month of November 20X6.

Accounts Receivable	$ 275,000
Advertising Expenses	54,000
Cash	260,000
Depreciation—Factory Equipment	16,800
Depreciation—Office Equipment	2,400
Direct Labor	42,000
Factory Supplies Used	16,800
Factory Utilities	10,200
Finished Goods Inventory, November 30	68,800
Finished Goods Inventory, October 31	72,550
Indirect Labor	48,000
Office Supplies Expense	1,600
Other Administrative Expenses	72,000
Prepaid Expenses	41,250
Raw Materials Inventory, November 30	52,700
Raw Materials Inventory, October 31	38,000
Raw Materials Purchases	184,500
Rent—Factory Equipment	47,000
Repairs—Factory Equipment	4,500
Salaries	325,000
Sales	1,350,000
Sales Commissions	40,500
Work In Process Inventory October 31	52,700
Work In Process Inventory, November 30	42,000

Part 1 assignment:

Sweet Wave Bakery has a sales mix of cakes, bread, and pies as follows:

Annual expected sales:

Sale of cakes 460,000 units at $26.50

Sale of bread 1,480,000 units at $11.20

Sale of pies 60,000 units at $42.50

Variable manufacturing cost per unit:

Cakes $13.96

Bread $ 7.95

Pies $29.75

Fixed manufacturing overhead cost (total) $760,000

Variable selling and administrative expenses per unit:

Cakes $1.30

Bread $0.50

Pies $3.41

Fixed selling and administrative expenses (total) $1,600,000

Instructions

(a) Determine the sales mix based on unit sales for each product.

(b) Assuming the sales mix remains the same, what is the break-even point in units for these products?

The section of Sweet Wave that produces pies for the company provided the following information.

February Sales: 4,000

Variable manufacturing cost per unit: $9.75

Sales price per unit: $42.50

Fixed manufacturing overhead cost: $81,000

Variable selling and administrative expenses per unit: $3.00

Fixed selling and administrative expenses (per month for pies): $13,122

Instructions

(a) Taking into consideration the information given for the production of pies, determine the following:

· contribution margin ratio

· the break-even point in dollars

· the margin of safety ratio

(b) Based on this analysis comment on the cost structure of the company as a whole.