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 You will assume the role of an entrepreneur starting a small company. Your company will produce and sell gourmet cupcakes through a storefront in a location of your choice. Your business is scheduled to launch on January 1, 2018. Cost information: 1 Cost of goods sold: a. Ingredients are .30 per cupcake b. Boxes and Cupcake Cups are .05 per cupcake 2 Equipment that will be required to be acquired at the start of business includes ovens, racks, display case, counter, cash register, and other baking equipment and will cost $140,000. The equipment is expected to last 10 years without salvage value. Straight-line method of depreciation should be used. 3 On average one person can make, bake, and decorate 24 cupcakes per hour. Bakers are paid $15.00 per hour. 4 Sales personnel are required for 56 hours per week and are paid $10.00 per hour. 5 Monthly rent, which includes utilities, is $1,500. 6 Business insurance is purchased at a cost of $1,000 per year. 7 Advertising costs are expected to be $6,000 per year. Requirements: Using separate tabs in a spreadsheet, provide your answers for the following.
4 Write out the annual cost formula in Y = a + bX format (5 points).
5 Develop a price using a target price (what do you think a customer will pay for one of your cupcakes? What are other companies charging for gourmet cupcakes?) Provide support for your target price
6 Develop a price using cost-based pricing assuming that you expect to sell 24,000 cupcakes the first year and would like to have a 20% profit
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 You will assume the role of an entrepreneur starting a small company. Your company will produce and sell gourmet cupcakes through a storefront in a location of your choice. Your business is scheduled to launch on January 1, 2018. Cost information: 1 Cost of goods sold: a. Ingredients are .30 per cupcake b. Boxes and Cupcake Cups are .05 per cupcake 2 Equipment that will be required to be acquired at the start of business includes ovens, racks, display case, counter, cash register, and other baking equipment and will cost $140,000. The equipment is expected to last 10 years without salvage value. Straight-line method of depreciation should be used. 3 On average one person can make, bake, and decorate 24 cupcakes per hour. Bakers are paid $15.00 per hour. 4 Sales personnel are required for 56 hours per week and are paid $10.00 per hour. 5 Monthly rent, which includes utilities, is $1,500. 6 Business insurance is purchased at a cost of $1,000 per year. 7 Advertising costs are expected to be $6,000 per year. Requirements: Using separate tabs in a spreadsheet, provide your answers for the following.
4 Write out the annual cost formula in Y = a + bX format (5 points).
5 Develop a price using a target price (what do you think a customer will pay for one of your cupcakes? What are other companies charging for gourmet cupcakes?) Provide support for your target price
6 Develop a price using cost-based pricing assuming that you expect to sell 24,000 cupcakes the first year and would like to have a 20% profit
