solve the required with explanation

A&J BAKERY INC.

A SIMPLIFIED MANAGEMENT ACCOUNTING PROJECT

INTRODUCTION

The objective of this project is to provide students with a practical application of some of the key concepts discuss in the managerial accounting course. It can be used as a half$-$semester long or concept driven project i$.$e$.,$ used along with the concepts$/$topics as they are introduced throughout the course.

LEARNING OUTCOMES

Students should be able to:

Identify the various costs that are part of a business environment and the three elements of product cost

Differentiate between the different costing systems

Illustrate business transactions using T$-$account analysis

Prepare the statement of cost of goods manufactured and an income statement

Calculate the break$-$even point in units and dollars, and target sales in units and dollars

A&J BAKERY INC.

Business Background

As she sat in her Accounting class bored while listening to the lecture on journal entries, Aria Jones could not imagine being an accountant in the future. As a young girl, she remembered sitting in the kitchen while her mom and aunts baked those delicious Rum cakes. She remembered that the cakes sold very quickly especially at Christmas time and that people were traveling from as far away as Florida to buy them. Her mom learned to bake from her mother, and she wrote down the cake recipes in case Aria or one of her siblings decided to follow in her footsteps. However, Aria chose to follow in her dad's path and so she enrolled in college with plans to become an accountant. Her two older sisters where already studying to be a lawyer and a dentist.

Aria had an epiphany as she sat in class, she would leave school at the end of the semester to open up a bakery specializing in Jamaican black cakes. Aria anticipated that most of her business would be based on special order, customized cakes. She anticipated selling cakes for family weekend gatherings, birthday and wedding celebrations, and holiday gathering. She wanted to have a few cakes available in a store to appeal to the drop in customer.

In December $2019$ Aria followed her plans; she dropped out of college, created a business plan, and incorporated as the A&J Bakery Inc. $($A&J$).$ The $J$ is in honor of her mom Julia who passed away earlier in the year. Aria planned to open her business on January $1,2021.$ She would use the $$50,000$ inheritance from her mom as start up capital and receive a minimal salary of $$500$ per month for the first year of business. Uncle David, a marketing executive with a national bank, agreed to provide her with marketing support pro$-$bono.

Aria found the perfect location for her business. A storefront on the busy intersection of Michigan and Grand River in Howell, MI after the owner retired. The landlord was impressed with Aria's vision and agreed to pay for all renovations and charge her $$600$ per month for rent.

Cost Classification

Her first action plan was to list all the key products or items that she would need to start the business. Aria's list ${?}^1$ included a conventional oven, a cash register, baking pans, business licenses, health inspections, flour, sugar, baking soda, raisins, butter, eggs and rum. She also planned on hiring her accounting professor on a part time basis to perform bookkeeping services and her nieces Brianna and Alexis, to help her in the bakery. Aunt Sue Ellen would supervise the girls so that Aria could focus on developing the business. A&J$\text{'}$s cost drivers are provided in Table $1.$

Required: Aria needs your help in classifying the various costs. In order to manage these costs, she wants them identified using the information below. She asked that you use Table $2$ for your answers.

a$)$ Behavior $($fixed or variable$)$

b$)$ Traceability $($direct or indirect$)$

c$)$ Financial reporting $($product or period$)$

d$)$ If product cost, identify which items are direct materials, direct labor or manufacturing overhead.

Costing Systems

Aria discussed the business plan with her accounting professor who agreed to serve as her part time accountant. His first advice was for the business to develop a budget. Since Aria did not complete ACC $3200,$ she was not aware of the various costing systems that exist in businesses. Her accounting professor told Aria of the three different types of costing systems that exist in organizations $-$ job order, process costing and activity based costing.

Required: Which type of costing system is A&J Bakery most likely to use? Discuss?

Business Transactions

Aria spent the month of December talking to various suppliers in order to determine her cost structure. She added cost data to the information in Table $1.$

A&J Bakery Inc. opened for business on January $1,2020$ as planned. During the month of January, the business purchased and used $200$ pounds of flour, $200$ pounds of sugar, $67$ dozen eggs and had $4$ bad eggs to dispose of during the month