ACC 202 Milestone Two Guidelines and Rubric

Overview

The next step in planning for your new business is to analyze the cost behaviors and systems of your industry and conduct the relevant financial calculations to determine appropriate costing solutions. In this milestone assignment, you will conduct a break-even analysis to determine your target profits and the selling price you plan to use to achieve these profits for each product.

Prompt

Use information from Milestone One and the provided Milestone Two Market Research Data Appendix Word Document to conduct a cost-volume profit analysis. Complete the Contribution Margin Analysis and Break-Even Analysis tabs in the Project Workbook Spreadsheet that you used for completing the Milestone One assignment.

Specifically, you must address the following rubric criteria:

• Contribution Margin. Determine your contribution margin per unit in the Contribution Margin Analysis tab.
  • Choose a sales price for each product.
  • Calculate the contribution margin for each product based on your sales price and the variable cost for that product. Show your work using calculations to the side of the table or using appropriate formulas in the table.
• Break-Even Analysis. Use cost-volume-profit (CVP) analysis to determine your break-even points for achieving your target profits in the Break-Even Analysis tab.
  • Determine the break-even points for each product. Show your work using calculations to the side of the table or using appropriate formulas in the table.
  • Determine break-even units for the suggested target profits for each product. Show your work using calculations to the side of the table or using appropriate formulas in the table.

What to Submit

Submit the Project Workbook with the Contribution Margin Analysis and Break-Even Analysis tabs completed. This file should be completed and submitted using Microsoft Excel.

• Collars
  • With pricing at $20 per collar, you can expect to sell 30 collars per day.
  • With pricing at $24 per collar, you can expect to sell 25 collars per day.
  • With pricing at $28 per collar, you can expect to sell 20 collars per day

• Leashes
  • With pricing at $22 per leash, you can expect to sell 28 leashes per day.
  • With pricing at $26 per leash, you can expect to sell 23 leashes per day.
  • With pricing at $30 per leash, you can expect to sell 18 leashes per day.

• Harnesses
  • With pricing at $25 per harness, you can expect to sell 25 harnesses per day.
  • With pricing at $30 per harness, you can expect to sell 22 harnesses per day.
  • With pricing at $35 per harness, you can expect to sell 20 harnesses per day.

Additionally, you will need to compare your break-even points for the following target profits for each area of your business to determine your prices:

• Collars
  • Break-even
  • $300 target profit each month
  • $500 target profit each month

• Leashes
  • Break-even
  • $400 target profit each month
  • $600 target profit each month

• Harnesses
  • Break-even
  • $500 target profit each month
  • $650 target profit each month

Remember that all break-even and target points must be in whole units (we cannot sell a partial unit). Round up when calculating partial units to ensure costs are covered. Excel tip use ROUNDUP function

Milestone One - Cost Classification
INSTRUCTIONS:
Putting an X in the appropriate spot, classify the costs as: Direct Material, Direct Labor, Overhead, or Period Costs.
The Fixed and Variable cost classifications have been provided for you.
Item/Cost	Direct Material	Direct Labor	Overhead	Period Costs	Fixed	Variable
Salary - Collar maker
Salary - Leash maker
Salary - Harness maker
Salary - Receptionist
High-tensile strength nylon webbing
Polyester/nylon ribbons
Buckles made of cast hardware
Depreciation on sewing machines
Rent
Utilities and insurance
Scissors, thread, and cording
Price tags
Office supplies
Other business equipment
Loan payment
Salary to self

Milestone One - Variable and Fixed Costs
Collars
Item	Variable Cost/Item		Item	Fixed Costs
High-tensile strength nylon webbing			Collar maker's salary (monthly)
Polyester/nylon ribbons			Depreciation on sewing machines
Buckles made of cast hardware			Rent
Price tags			Utilities and insurance
			Scissors, thread, and cording
			Loan payment
			Salary to self
Total Variable Costs per Collar	$ -		Total Fixed Costs	$ -
Leashes
Item	Variable Cost/Item		Item	Fixed Costs
High-tensile strength nylon webbing			Leash maker's salary (monthly)
Polyester/nylon ribbons			Depreciation on sewing machines
Buckles made of cast hardware			Rent
Price tags			Utilities and insurance
			Scissors, thread, and cording
			Loan payment
			Salary to self
Total Variable Costs per Leash	$ -		Total Fixed Costs	$ -
Harnesses
Item	Variable Cost/Item		Item	Fixed Costs
High-tensile strength nylon webbing			Harness maker's salary
Polyester/nylon ribbons			Depreciation on sewing machines
Buckles made of cast hardware			Rent
Price tags			Utilities and insurance
			Scissors, thread, and cording
			Loan
			Salary to self
Total Variable Costs per Harness	$ -		Total Fixed Costs	$ -