The purpose of this case study is to help you integrate the managerial accounting concepts that were covered in class and apply them to a real-world business setting. Business Description Daisy, a friend who is an excellent baker, has decided to open a cupcake store to sell gourmet cupcakes.

Daisy has asked you if you will be willing to loan the company $50,000 at an interest rate of 4% that will be paid back over 5 years. You will analyze the business to determine if you will loan Daisy the money. The business is scheduled to launch on January 1, 2019. Daisy has provided you with the following cost information.

Cost information: Cost of goods sold: a. Ingredients are .30 per cupcake b. Cupcake Cups are .01 per cupcake

Daisy has found a fully equipped commercial kitchen near downtown with a store front that will be rented for $1,000 per month.

Utilities will be $125 per month.

On average one person can make, bake, and decorate 36 cupcakes per hour. Bakers are paid $18.00 per hour.

A worker will be needed for the store front to sell the cupcakes. Daisy plans to open the store 7 days per week from 11:00 AM until 7:00 PM.

Sales people will be paid $9.00 per hour.

Business insurance is purchased at a cost of $750 per year.

Advertising costs are expected to be $3,600 per year.

TOTAL VARIABLE COST: $1.15

TOTAL FIXED COST: $17,850.00

Y = $17,850.00 + $1.15X

Contribution Margin $48,000 Contribution Margin Ration: $58.18%

BEP: 11,156 Units

BEP $: $30,679

1 Describe the variances that Daisy should analyze to monitor the business. (10 points)

2 Provide at least 4 metrics that Daisy could include to monitor the business using a balanced scorecard approach. (10 points)

3 If Daisy decides to expand her business by investing in her own equipment, which capital budgeting model would you recommend? Why? (10 points)

4 Will you lend $50,000 to Daisy to start her business? Based on the calculations performed explain why or why not (10 points).