ACC 202 Milestone Three: Actual Costs and Revenue Data Appendix

At the end of the first month of opening your business, you calculate the actual operating costs of the business and the income you earned. You also notice and document the difference in what you budgeted for certain materials and labor against the actual amounts you spent on the same.For your statement ofcost of goods sold, use the following data regarding the actual costs incurred by the business over the past month:

• Materials purchased: $20,000
  • Consumed 80% of the purchased materials
• Direct labor: $8,493.33
• Overhead costs: $3,765

Note: Assume that the beginning materials and ending work in process are zero for the month.

Use the following revenue and cost information for the income statement. Note that the revenue you use will depend on the pricing level options you chose in Milestone Two. Also, assume that after accounting for weekends and other holidays, there were 20 business days in the first month of operation. For example, if you chose a sales price of $20 per collar, the actual number of collars sold in the month was 33 per day or 33 x 20 = 660 per month.

The other costs incurred by the business include:

• General and administrative salaries
  • Receptionist: $1,950
  • Owner salary: $500
• Depreciation: $165
• Rent: $750
• Utilities and insurance: $600
• Scissors, thread, and cording: $1,200
• Loan repayment: $550

Variance

At the end of the month, you find that the labor and materials spent on manufacturing collars was different from what you estimated:

• The collar maker had to work nine hours a day instead of eight due to an increased demand for collars.
• Because of the increased demand, the hourly rate you paid your employee for making the collars increased to $16.50.
• An increase in the cost of raw material led the direct material cost per collar to increase to $10.
• However, you also made and sold 60 more collars than you expected to sell in the month.

You now need to determine the variance in the materials and labor cost from what you estimated in Milestone Two based on the market research data.

Pricing level I chose in Milestone Two

Established Sales Price	Number of Items Sold per Day
Collar $28	23
Leases $30	18
Harnesses $35	20

Milestone One - Variable and Fixed Costs Collars Fixed Costs Item High-tensile strength nylon webbing Polyesterylon ribbons Buckles made of cast hardware Price tags Variable Cost/Item $ 4.00 $ 3.00 $ 2.00 $ 0.10 Item Collar maker's salary (monthly) Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Loan payment Salary to self $ $ $ $ $ $ $ $ $ 2,773.33 55.00 250.00 200.00 400.00 183.33 166.67 Total Variable Costs per Collar $ 9.10 Total Fixed Costs $ 4,028.33 Leashes Item Fixed Costs Item Variable Cost/Item High-tensile strength nylon webbing $ 6.00 Polyesterylon ribbons $ 4.50 Buckles made of cast hardware $ Price tags $ 0.10 1.50 Leash maker's salary (monthly) Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Loan payment Salary to self $ $ $ $ $ $ $ 2,773.33 55.00 250.00 200.00 400.00 183.33 166.67 Total Variable Costs per Leash $ 12.10 Total Fixed Costs $ 4,028.33 Item Fixed Costs Harnesses Item Variable Cost/Item High-tensile strength nylon webbing $ 6.00 Polyesterylon ribbons $ $ 4.50 Buckles made of cast hardware $ $ 4.00 Price tags $ 0.10 Harness maker's salary Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Loan Salary to self $ $ $ $ $ $ $ $ $ 2,946.67 55.00 250.00 200.00 400.00 183.33 166.67 Total Variable Costs per Harness $ 14.60 Total Fixed Costs $ 4,201.67 Milestone Two - Contribution Margin Analysis 5 COLLARS LEASHES HARNESSES $ $ $ 28.00 (9.10) 30.00 (12.10) 35.00 (14.60) 3 Sales Price per Unit ($) (A) e Variable Cost per Unit ($) (B) 1 Contribution Margin (A-B) 2 $ 18.90 $ 17.90 $ 20.40 4 Milestone Two - Break-Even Analysis COLLARS LEASHES HARNESSES Sales Price $ 28.00 $ 30.00 $ 35.00 Fixed Costs $ 4,028 $ 4,028 $ 4,202 Contribution Margin $ 18.90 $ 17.90 $ 20.40 Break-Even Units (round up) 213.00 225.00 206.00 Target Profit $ 300.00 $ 400.00 $ 500.00 Break-Even Units (round up) 229.00 247.00 230.00 Target Profit $ 500.00 $ 600.00 $ 650.00 Break-Even Units (round up) 240.00 259.00 238.00 A B C D 1 2 Milestone Three - Statement of Cost of Goods Sold 3 3 4 0 0 20,000 $ 20,000 (4,000) $ 16,000 6 Beginning Work in Process Inventory 7 Direct Materials: 8 Materials: Beginning 9 Add: Purchases for month of January 11 Materials available for use 12 Deduct: Ending materials 14 Materials Used 15 16 Direct Labor 17 Overhead 19 Total Costs 20 21 Deduct: Ending Work in Process Inventory 22 23 Cost of Goods Sold 24 8,493 3,765 $ 28,258 $28,258.33 $ $ 28,258.33 25 26 1 # 2 Milestone Three - Income Statement 3 (28,258) 4 5 Revenue: 6 Collars 7 Leashes 8 Harnesses 9 10 Total Revenue: 11 Cost of goods sold 12 Gross profit 13 14 Expenses: 15 General and administrative salaries 16 Depreciation 17 Rent 18 Utilities and insurance 19 Scissors, thread, and cording 20 Loan 21 22 Total Expenses 23 24 Net Income/Loss 25 26 $ $ (2,450) (165) (750) (600) $ (1,200.00) (550) Milestone Three - Variance Analysis Data for Variance Analysis: Budgeted (Standard) Hours/Qty Budgeted (Standard) Rate Actual Hours/Qty Actual Rate Labor Materials Variances for Collar Sales Favorable/ Unfavorable Variance Direct Labor Time Variance (Actual Hours - Standard Hours) x Standard Rate $ Direct Labor Rate Variance (Actual Rate - Standard Rate) x Actual Hours $ Direct Materials Quantity/Efficiency Variance (Actual Quantity - Standard Quantity) x Standard Price $ Direct Materials Price Variance (Actual Price - Standard Price) x Actual Quantity $