It is December $31,2023,$ ?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 $2023$ ?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 August$/$September and late December, as students and families stock up for the coming school year as the price of $$8$ ?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.

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Operational Details Production history: The company began operations this year, and as such did not have a beginning inventory. They expect sales to maintain their current levels and frequency and are planning on producing the same number of donairs in 2024. 2023 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Units sold 3,000 2,500 2,000 2,000 2,000 3,000 3,000 6,000 2,000 2,000 2,500 6,000 Units 3,500 3,000 2,500 2,500 2,500 3,500 3,500 5,500 3,500 3,000 4,000 5,000 Produced 2023 Total units sold: 36,000 2023 Total units produced 42,000 Costs The rent for the commercial kitchen, used exclusively for manufacturing and production, is $1,000/month. They have a kitchen/production manager on salary, at $30,000, however paid an extra $8,000 in overtime last year. If the production is stabilized, they expect to save $1,000 in overtime during the year. They also employ two salespeople who work for a flat rate of $1,500 per month per person, with a bonus of $500 per quarter per person if sales targets are met. It is anticipated targets will be met in 2024 as they were in 2023. The additional rent for a cold storage unit would be $100 per 1,000 donairs and no partial storage units are permitted, Other relevant costs are as follows: Food Cost: $1.25 per donair Packaging Direct Labour $0.25 per donair $1.50 per donair Administration and selling costs $0.75 per donair Operational Details Production history: The company began operations this year, and as such did not have a beginning inventory. They expect sales to maintain their current levels and frequency and are planning on producing the same number of donairs in 2024. 2023 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Units sold 3,000 2,500 2,000 2,000 2,000 3,000 3,000 6,000 2,000 2,000 2,500 6,000 Units 3,500 3,000 2,500 2,500 2,500 3,500 3,500 5,500 3,500 3,000 4,000 5,000 Produced 2023 Total units sold: 36,000 2023 Total units produced 42,000 Costs The rent for the commercial kitchen, used exclusively for manufacturing and production, is $1,000/month. They have a kitchen/production manager on salary, at $30,000, however paid an extra $8,000 in overtime last year. If the production is stabilized, they expect to save $1,000 in overtime during the year. They also employ two salespeople who work for a flat rate of $1,500 per month per person, with a bonus of $500 per quarter per person if sales targets are met. It is anticipated targets will be met in 2024 as they were in 2023. The additional rent for a cold storage unit would be $100 per 1,000 donairs and no partial storage units are permitted, Other relevant costs are as follows: Food Cost: $1.25 per donair Packaging Direct Labour $0.25 per donair $1.50 per donair Administration and selling costs $0.75 per donair