It is December 3 1 , 2 0 2 3 , ?you have been hired by
Question:
It is December ?you have been hired by a local frozen donair company FDC Ltd ?to evaluate their operations and help with some cost accounting as their existing accountant is too busy to do any further analysis aside from preparing financial statements. The accountant is looking to complete ?year end and is lacking some information with respect to year end inventory and costing. The accountant has provided you with a data set to complete inventory and costing calculations. The company utilizes absorption costing and will need an income statement prepared for internal purposes, in addition to the value of the year end inventory for the balance sheet.
FDC Ltd busiest time of year is AugustSeptember and late December, as students and families stock up for the coming school year as the price of $ ?per donair makes for a quick and relatively affordable meal. Some months however are very slow, with production varying wildly to match demand. Given the fluctuations in sales, the company is looking for cold storage freezer space as they want to be able to keep manufacturing levels as stable as possible to avoid fluctuations in their labour force. In order to understand the costs associated with renting freezer space, they need to know what the optimal production amount would be per month, as well as the maximum number of units they will have to store given the typical fluctuation in sales and their new, optimized production schedule.
In addition to the above, FDC Ltd needs to understand what their current break even point is in units, and whether they would be able to afford this new cost given the current level of sales ?you may have to determine their margin of safety to do this The owners have indicated they need to maintain the current operating income next year, despite the extra cold storage costs, and are curious how many more units they will need to sell to maintain the current operating income. They are also looking for your advice on other specific ways they could maintain their operating income without having to sell more donairs, and what aspects of the business are likely more difficult to control?
Prepare a memo full sentence answers and conclusions ?discussing the issues.
Provide support show your work ?for any calculations including explaining assumptions if any ?that were made.