Managerial Accounting - Breakeven analysis and cost-volume-profit (CVP) analysis

UNIT 2 ASSSIGNMENT

Sara is thinking about starting a cake company producing cakes wholesale for weddings and special events. In this business, she will also have a retail store, selling cakes to the public. You are hired as a consultant to help with this, and you are asked to create a 3 page report that includes three parts. The paper should be written in APA format. In the first part, explain the definitions of a breakeven analysis and a cost-volume-profit (CVP) analysis. Discuss the process of conducting these analyses as well as different considerations that Sara's management would need to think about when doing such analyses.

In the second part of this report, you need to conduct a monthly breakeven analysis using the information below to see how many cakes needs to be sold each month:

Monthly Costs:	Amount:
Rent	$2,500
Utilities	$1,800
Insurance	$250
Non production payroll	$3,500
Advertising	$500
Taxes and Licenses	$350
Production Costs Per Cake:	Amount:
Flour	$1.25
Yeast	$0.05
Sugar	$0.25
Eggs	$0.75
Butter	$0.15
Frosting	$0.95
Production Payroll	$4.50
Selling Price Per Cake:	$15

 

In the third part of the report, you need to do a cost-volume-profit (CVP) analysis for each of the following scenarios: Rent increases to $4,500 a month, the price of flour increases to $2.25 per cake, and if the selling price of cakes is increased to $18 per cake. For each scenario, assume all other numbers stay the same. Contrast this to the original breakeven to see the differences.