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00 Your Cookie Company A Managerial Case Study . ACC 501 You are the owner of your own cookie company. Fast growth and the need to expand have made it necessary for you to seek financing from a local bank. However, you need to show the banker your plans for the coming year. Using your own, unique data, you will prepare a comprehensive master budget and pro forma financial statements in Excel to show the banker your projected earnings and financial position. Good luck getting that bank loan! INTRODUCTION You knew they were good, but you never thought Grandma's old cookie recipe would bring you this far! It all started about three years ago when you began using your Grandma's cookie recipe to bake, what most people consider, the "best tasting cookies they have ever put in their mouth." After finishing college, you started baking cookies as a little side business. You bake them right in your home and sell them to friends and local stores. Response has been great! People love the cookies, and you are making a little extra money, Your fast sales growth has negatives in addition to positives. The volume of business has grown so much that you can no longer keep up with demand. Your desire to grow this hobby into a full-fledged business has led you to explore expanding, You have been investigating new facilities and equipment, and checking into the requirements of hiring a few employees. However, there is one problem; you don't have the money to expand! On the advice of a friend, you meet with a local banker. You share your dreams and ideas, and your need to borrow some money. The banker is encouraging and helpful. However, she states that the bank cannot lend you any money without a business plan that describes your financial results, marketing strategy and projections for the future. You show the banker your income statement and balance sheet as of the most recent year-end, and the banker is impressed! "Looks very promising," she states. "But what I really need to see is what you plan to do with the money that I will lend you and what your business will look like next year." When you return home after the meeting, you pull out your old college accounting textbook. You realize that this is a master budget problem just like you did in college. After reviewing your class notes and reading the textbook, you settle in to produce a plan for the first quarter of next year. ASSIGNMENT PART 1 You immediately realize that you must gain an understanding of your cost structure and of the relationship between your revenues, costs, and profits. You pull out Grandma's recipe to see what ingredients it takes to make nine cookies. Next, you go to your invoice files to determine the cost of each of the ingredients. You brainstorm to develop a list of the new costs that you must incur when you expand your operations. After analyzing all of this data you are able to break out your costs into several categories. You realize that some costs are for raw materials while others are related to manufacturing overhead or operating expenses. You also realize that some costs appear to be fixed while other costs are variable. Now you have sufficient information to determine how much money you can make when you sell these cookies. Note that you will package and sell these cookies in packages of 9. This has several consequences to your math. First, one unit of cookies is a nine. Second, your recipe may make 18, 24 or some other amount of cookies - this is your batch amount. Some costs are per batch and others are per unit. Please pay attention to this. Requirements: 1. Think of your favorite cookie recipe or search the Internet and find a recipe for a cookie or some other type of similar dessert. This recipe will be your "Grandma's recipe" that you make and sell in your business. Save a copy of this recipe. Recipe requirements: -Must have at least five ingredients -Cannot be Nestle Chocolate Chip cookies off of the package You must consult your recipe to determine the amount of ingredients required for one batch of cookies. You also must consult Exhibits 1 and 2 for information regarding the costs of ingredients, manufacturing overhead, and operating expenses. If your cookies have minor ingredients (