Question 8 (20 Marks)

Part A (10 Marks)

The costs incurred by Treats Bakery Ltd. as part of its operations are listed below.

Cost Items	Amount $
Insurance on factory equipment	4,700
Wheat Flour and other key baking materials	55,800
Depreciation of computers used in the sales department	1,500
Bakers wages	38,600
Utility cost of the sales department	1,300
Rental for factory space	7,800
Depreciation on ovens and other factory equipment	4,800
Rental of space for the sales department	5,600
Salary of factory supervisor	17,000
Factory utility cost	6,900

Required

You are required to calculate the:

a) Prime cost (2 Marks)

b) Conversion cost (2 Marks)

c) Period cost (3 Marks)

d) Product cost (3 Marks)

Show all calculations.

Part B (10 Marks)

Myfoodz is a famous fresh ready-made meals business that operates in many suburbs in New South Wales. The selling price of a ready-made meal is $12. It is estimated that the company will incur a variable cost of $288,000 to make and deliver 32,000 meals (estimated production and sales). The companys estimated fixed cost is $45,000.

Required

You are required to calculate the following. Show all calculations.

a) What is Myfoodzs contribution margin ratio? (2 Marks)

b) Calculate Myfoodzs break-even point in units (meals). (2 Marks)

c) Calculate Myfoodzs break-even point in sales dollars. (1 Mark)

d) (i) What is Myfoodzs margin of safety ratio? (Round off the answer to the nearest 2 decimal places). (1 Mark)

(ii) How can managers of Myfoodz use this margin of safety ratio information to manage the profitability of the business? (2 Marks)

e) How many meals must the company sell to earn a target profit of $90000? (2 Marks)