Task 2 Question 3

3) Assuming what you stated in 1) and 2), calculate the Residual Income if the required rate of return is 13%

Task 1 Michelle and Vishayla need to know the cost per cake so they can be sure they are charging enough for each cake. They also need this to calculate the cost of goods sold. They feel that direct labor hour is the best cost driver for allocating manufacturing overhead. They pay their wage employees $18.00 per hour. Due to the type of production that they have, they believe job order costing is the best costing system. Here is the estimated data for 2020: Type of cake Expected Annual sales Direct Labor Hour per cake 10 1 tier wedding cake 2 tier wedding cake 3 tier wedding cake Large sheet cake Medium sheet cake Small sheet cake 440 340 140 480 640 790 Raw Selling Price Ingredient per cake cost per cake $325.00 $80.00 $525.00 $90.00 $725.00 $115.00 $245.00 $65.00 $215.00 $55.00 $200.00 $50.00 Expense Total direct materials Total direct labor Total factory overhead Selling Cost Adminstrative Costs Total Costs Estimated annual amount $187,800.00 $437,220.00 $67,900.00 $17,500.00 $108,700.00 $819,120.00 rvartable verses Fheed Costs Total Variable Costs Total Fixed Costs Tatal costs $649,120.00 $170,000.00 $819,120.00 Requirements: 1) Calculate the cost per cake 2) Create a budgeted Traditional Income Statement and a Contribution Income Statement 3) Calculate the breakeven point in dollars 4) Calculate a target profit in dollars for a profit of $130,000. Task 2 They believe it will cost them $240,000 to purchase the land near Fort Lee and to build a bakery and storefront. Your task is: 1) Calculate the Return on Investment if the expected increase in Operating income, due to opening the new location near Ft. Lee, is $36,000. 2) Assuming what was stated in 1), calculate the Asset Turnover Rate and Profit Margin if the Expected Sales also increase to $440,000 3) Assuming what is stated in 1) and 2), calculate the Residual Income if the required rate of return is 13%