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.

Milestone One - Variable and Fixed Costs Collars Item Variable Cost/Item Item Fixed Costs High-tensile strength nylon webbing (given) 4.00 Collar maker's salary (monthly) (given) 2,773.33 Polyesterylon ribbons ($9 per yard/3 collars per yard $ 3.00 Depreciation on sewing machines ($165 dep. Per month, $ 55.00 Buckles made of cast hardware (4 buckles per collar/$( $ 2.00 Rent 750/3 (separate sections) or $750 per month times $ 250.00 Price tags ($250 for 2500-250/2500) S 0.10 Utilities and insurance 600/3 or $600 per month times : $ 200.00 Scissors, thread, and cording ($1200/3 services) 400.00 Loan payment (given) 183.33 Salary to self (given) 166.67 Total Variable Costs per Collar formula in block B 19 S 9.10 Total Fixed Costs formula in block E19 S 4,028.33Milestone Two - Contribution Margin Analysis COLLARS LEASHES HARNESSES Sales Price per Unit S 20.00 S 22.00 S 25.00 Variable Cost per Unit $9.10 12.10 14.60 Contribution Margin (CM is Sales minus $ 10.90 S 9.90 S 10.40Milestone Two - Break-Even Analysis COLLARS LEASHES HARNESSES Sales Price S 20.00 S 22.00 S 25.00 Fixed Costs S 4,028 S 4,028 S 4,202 Contribution Margin S 10.90 S 9.90 S 10.40 Break-Even Units (round up) fixed costs 370.00 4028.33 di 407.00 4201.67 di 405.00 Target Profit 300.00 S 400.00 500.00 Break-Even Units (round up) (fixed cost | 398.00 4028.33 + 448.00 40201.67 [ 453.00 Target Profit 500.00 $ 600.00 650.00 Break-Even Units (round up) 4028.33 pl 416.00 4028.33 pl 468.00 4201.67 pl 467.00Milestone Three - Statement of Cost of Goods Sold Beginning Work in Process Inventory first month/zero Direct Materials: Materials: Beginning first month Add: Purchases for month of January S 20,000 Materials available for use (given) 20,000 Deduct: Ending materials (given that 80% of purch 4,000 Materials Used given that 80% ( 16,000 Direct Labor given 8,493 Overhead given 3,765 Total Costs S 28,258 Deduct: Ending Work in Process Inventory 0 Cost of Goods Sold (nothing to deduct fr $ 28,258Milestone Three - Income Statement Revenue: Collars $20 multiplied by 20 days al $ 13,200 Leashes $22x20x28 12,320 Harnesses $25x20x23 12,500 Total Revenue: added collars, least $ 38,020 Cost of goods sold from COGS tab- subt (28,258) Gross profit S 9,762 Expenses: General and administrative salaries given S (1,950) Office supplies given (200) Other business equipment given (150) Total Expenses add expenses $ (2,300.00) Net Income/Loss add/subtract gross | $ 7,462.00Milestone Three - Variance Analysis Data for Variance Analysis: Budgeted Budgeted Actual Actual (Standard) (Standard) Hours/Qty Rate Hours/Qty Rate 20 days times 8 given 20 days times 9 given hours a day hours a day Labor 160 S 16.00 180 S 16.50 Materials 660 S 9.10 720 S 10.00 Variances for Collar Sales Favorable/ Variance Unfavorable Direct Labor Time Variance (Actual Hours - Standard Hours) x Standard Rate S 320.00 Unfavorable Direct Labor Rate Variance (Actual Rate - Standard Rate) x Actual Hours S 90.00 Unfavorable Direct Materials Quantity/Efficiency Variance (Actual Quantity - Standard Quantity) x Standard Price S 546.00 Favorable Direct Materials Price Variance (Actual Price - Standard Price) x Actual Quantity S 648.00 Favorable