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 of cost 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
• 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
• Office supplies: $200
• Other business equipment: $150

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.

Collars Item Item Variable Cost/Item High-tensile strength nylon webbing 5 4.00 Polyesterylon ribbons 3.00 Buckles made of cast hardware $ 2.00 Price tags $ 0.10 Collar maker's salary (monthly) Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Loan payment Salary to self S S $ $ S S $ Fixed Costs 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 Variable Cost/Item High-tensile strength nylon webbing $ 6.00 Polyesterylon ribbons 4.50 Buckles made of cast hardware $ 1.50 Price tags 0.10 Item Leash maker's salary (monthly) Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Loan payment Salary to self $ $ $ $ Fixed Costs 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 Harnesses Item Fixed Costs | $ 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 uuuuuuu 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 COLLARS LEASHES HARNESSES $ $ Sales Price per Unit Variable Cost per Unit Contribution Margin 20.00 9.10 22.00 12.10 25.00 14.60 $ 10.90 B8-B9 $ 9.90 D8-D9 $ 10.40 F Milestone Two - Break-Even Analysis COLLARS LEASHES HARNESSES 25.00 Sales Price $ 20.00 22.00 $ $ Fixed Costs $ 4,028 $ 4,028 $ 4,202 $ $ Contribution Margin $ 10.90 $ 9.90 10.40 Break-Even Units (round up) 370.00 407.00 404.00 Target Profit $ 300.00 400.00 $ 500.00 Break-Even Units (round up) 397.00 447.00 452.00 Target Profit $ 500.00 $ 600.00 $ 650.00 Break-Even Units (round up) 415.00 467.00 466.00 Milestone Three - Statement of Cost of Goods Sold S 0 Beginning Work in Process Inventory Direct Materials: Materials: Beginning Add: Purchases for month of January Materials available for use Deduct: Ending materials Materials Used Direct Labor Overhead Total Costs Deduct: Ending Work in Process Inventory 0 Cost of Goods Sold Milestone Three - Income Statement $ Revenue: Collars Leashes Harnesses 8,300 10,274 11,650 $ Total Revenue: Cost of goods sold Gross profit 30,224 24,724 5,500 $ $ Expenses: General and administrative salaries Office supplies Other business equipment 2,300 200 167 Total Expenses $ 2,667.00 Net Income/Loss $ 2,833.00 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