The product I selected is "COOKIES & CAKES". Assume that you have decided to start a small business producting and selling this product. You will be applying the concepts of cost-volume-profit analysis to this potential venture.

1. Make projections of your sales in units and the price you will sell your product for over each of the upcoming five years.
2. Make a detailed list of all the materials needed to make your product including quantities needed of each material and the cost of the material on a per-unit basis.
3. Make a list of all the equipment you will need to make your product. Estimate the cost of each piece of equipment that you will need.
4. Make a list of all other expenses that would be needed to make and sell your product for each of the upcoming five years. For example, labor, rent, utilities, insurance...
5. Classify all of the expenses you have listed as being either manufacturing costs or nonmanufacturing costs. For manufacturing costs, classify them into: direct materials, direct labor, and manufacturing overhead.
6. Classify all of the expenses you have listed as being either fixed or variable. For mixed expenses, separate the expense into the fixed component and the variable component.
7. Calculate how many units of your product you will need to see to break even in each of the five years you have projected.
8. Calculate the margin of safety in units for each of the five years in your projection.
9. Decide how much you would like to make in before-tax operating income (target profit) in each of the upcoming five years. Calculate how many units you would need to sell in each of the upcoming years to meet those target profit levels.

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