The goal of this assignment is to gain an understanding of cost structure and the relationship between revenues, costs, and profits. You pull out "Grandma's Cookie Recipe" to see what ingredients it takes to make a dozen cookies. Next, you go to your invoice files to determine the cost of each ingredient. You brainstorm to develop a list of the new costs you must incur when expanding your operations.

After analyzing all this data, you can divide 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 others are variable. Now, you have sufficient information to determine how much money you can make when you sell these cookies.

Assignment Directions:

Assign one cookie recipe from Exhibit $1$ to each group member. You must review your recipe to determine the amount of ingredients required to make one dozen cookies.

a$.$ You must also consult Exhibit $2$ for information regarding the costs of ingredients, manufacturing overhead, and operating expenses.

b$.$ If your cookies have ingredients not included in Exhibit $2,$ these ingredients are considered part of overhead and will not be added separately $($but included in $OH).$

c$.$ Calculate the total direct material cost for your cookie recipe.

Now that you have a direct material cost, calculate the following:

a$.$ Total variable costs per dozen cookies.

b$.$ Sales price per dozen cookies using "markup on variable costs." Round up to the nearest quarter$-$dollar $(0,\mathrm{.}25,\mathrm{.}50,\mathrm{.}75).$ For example: $$10\mathrm{.}40,$ the selling price would be $$10\mathrm{.}50.$

c$.$ Contribution margin per dozen cookies. $($Total dollar amount, per unit, and $\%)$

d$.$ Breakeven point for the quarter $($three months$)$ in dollar sales and in unit sales.

e$.$ Construct a Contribution Margin Format Income Statement to project Net Income using projected sales data from Exhibit $3$ for the quarter.

f$.$ Create a sales budget and cash collections budget for the First Quarter.

Using an Excel spreadsheet, please organize your answers to Questions $1$ and $2$ and display them using the Excel templates provided.