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

oConsumed 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.

Established Sales Price

Number of Items Sold per Day

Collars

$20

33

$24

28

$28

23

Leashes

$22

28

$26

23

$30

18

Harnesses

$25

25

$30

22

$35

20

The other costs incurred by the business include:

General and administrative salaries

oReceptionist: $1,950

oOwner 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.

Milestone Two - Break-Even Analysis COLLARS LEASHES HARNESSES Sales Price S 24.00 S 26.00 S 30.00 Fixed Costs S 4,028.33 5 4,028.33 5 4,201.67 Contribution Margin S 16.40 S 14.90 S 18.90 Break-Even Units (round up) 246.00 271.00 223.00 Target Profit S 300.00 S 400.00 S 500.00 Break-Even Units (round up) 264 298 249 ( fixed cost + target profit) / contribution margin Target Profit 500.00 S 600.00 S 650.00 Break-Even Units (round up) 277 311 257 ( fixed cost + target profit) / contribution marginMilestone Two - Contribution Margin Analysis HAHNESSES Sales Price per Unit 30111 1\"Variable Cost per Unit _ 11.10 Contribution Margin 1550