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: $8,493.33
• Overhead costs: $3,765 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.

Milestone Two - Contribution Margin Analysis Item Collars Item Variable Cost/Item High-tensile strength nylon webbing $ 4.00 Polyesterylon bbons $ 3.00 Buckles made of cast hardware s 2.00 Price tags s 0.10 Collar maker's salary monthly Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Loan payment Salary to sell Fixed Costs $ 2,773.33 $ 55.00 $ 250.00 s 200.00 $ 400.00 $ 183.33 $ 166 67 COLLARS LEASHES HARNESSES $ $ $ Sales Price per Unit Variable Cost per Unit Contribution Margin 28.00 9.10 30.00 12.10 35.00 14.60 Total Variable costs per Collar 9.10 Total Fled Costs $ 4,028.33 $ 18.90 $ 17.90 $ 20.40 .. I Screen Shot 2021-... @ Leashes Item Variable Cost/Item High-tensile strength nylon webbing S 6.00 Polyesterylon ribbons S 4.50 Buckles made of cast hardware $ 1.50 $ 0.10 Milestone Two - Break-Even Analysis Item Leash maker's salary(monthly) Depreciation on sewing machines Rent Utilities and insurance Scissors, thread and carding Loan payment Salary to set Fred Costs $ 2773.33 $ 55.00 $ 250.00 200.00 $ 400.00 $ 183.33 $ 166.67 Prieties LEASHES COLLARS 28.00 HARNESSES 35.00 Sales Price $ S 30.00 S 5-14.60)=260 -14.60)=338 -14.60)=408 Fixed Costs S 4,028 $ 4,028 S 4.202 $ 18.90 $ 17.90 Contribution Margin $ Total Variable Costs per Leash 20 40 $ 12.10 Total Fixed Costs $ 4,028.33 Break-Even Units fround up! 213.00 225.00 206.00 Item Target Profit $ 300.00 $ 400.00 $ 500.000 Harnesses Item Variable Cost/Item High-tensile strength nylon webbing $ 6.00 Polyesterylon ribbons S 4.50 Buckles made of cast hardware $ 4.00 Price tags $ 0.10 Break Events round up) 229.00 247.00 230.00 Harnessmaker's salary Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Loan Salary to sell Fixed Costs $ 2.946.67 $ 55.00 $ 250.00 $ 200.00 $ 400.00 $ 181.33 $ 166.67 Relocated items ARKIT Screen Shot 2021-10...10.17 PM Target Profit $ 500.00 5 600.00 S 650.00 Break-Even Units fround up) 240.00 259.00 238.00 Total Variable Costs per Harness $ 14.60 3 Total Fixed Costs $ 4,201.67 break even 4,028/18.90 4028/17.90 4202/20.40 500+4028/18.90 500+4028/17.90 650+4201/20.40 Screen Shot 2021-10...8.43 PM 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 $ $ 0 20,000 20,000 (4,000) Budgeted (Standard) Rate Actual Hours/Qty Actual Rate $ 16,000 2 Milestone Three - Variance Analysis 3 4 5 Data for Variance Analysis: Budgeted (Standard) 6 Hours/Qty 7 8 Labor 9 10 11 Materials 12 13 14 15 Variances for Collar Sales Direct Labor Overhead 8,493 3,765 28,258 Total Costs $ Deduct: Ending Work in Process Inventory : 0 Cost of Goods Sold D- Screen Shot 20... Favorable/ Unfavorable Variance Revenue: Collars Leashes Hamnesses $ $ $ Total Revenue: Cost of goods sold Gross profit $ 16 17 Direct Labor Time Variance 18 (Actual Hours - Standard Hours) x Standard Rate 19 20 Direct Labor Rate Variance 21 (Actual Rate - Standard Rate) Actual Hours 22 23 Direct Materials Quantity/Efficiency Variance 24 (Actual Quantity - Standard Quantity) Standard Price 25 26 Direct Materials Price Variance 27 (Actual Price - Standard Price) Actual Quantity 28 29 $ Expenses: General and administrative salaries Depreciation Rent Utilities and insurance Scissors, thread, and cording Loan $ 2021-10...10.17 P Total Expenses $