• Cost Classification. Accurately classify all your costs in the Cost Classification tab of your workbook.
  • Identify direct material, direct labor, overhead, and period costs. (Note: Fixed and variable costs have been classified for you.)

You plan to open a small business for manufacturing pet collars, leashes, and harnesses. You have found a workshop space you can use for sewing your products. After some research and planning, you have estimates for the various operating costs for your business.

The total square footage for the sewing rooms is 1,500 square feet broken into three areas (500 square feet each). You have taken out a loan for start-up costs, and the monthly payment is $550; it goes into effect immediately and should be accounted for in your costs. You will also collect a modest salary for the first year of $500 per month; remember to divide evenly among the services.

Salary and Hiring Data

• One collar maker, who will be paid $16.00 per hour and work 40 hours per week
• One leash maker, who will be paid $16.00 per hour and work 40 hours per week
• One harness maker, who will be paid $17.00 per hour and work 40 hours per week
• One receptionist, who will be paid $15.00 per hour and work 30 hours per week

Other Costs

• Rent: $750 per month; allocate based on square footage
• High-tensile strength nylon webbing$12 per yard of webbing
  • 3 collars per yard of webbing
  • 2 leashes per yard of webbing
  • 2 harnesses per yard of webbing
• Polyesterylon ribbons$9 per yard of ribbon
  • 3 collars per yard of ribbon
  • 2 leashes per yard of ribbon
  • 2 harnesses per yard of ribbon
• Buckles made of cast hardware$0.50 per buckle
  • 4 buckles used per collar
  • 3 buckles used per leash
  • 8 buckles used per harness
• 3 industrial sewing machines at $3,300 each for a total of $9,900; depreciation is $165 per month (5-year life)
• Utilities and insurance: $600 per month; allocate based on square footage
• Scissors, thread, cording: $1,200
• Price tags: $250 for 2,500 ($0.10 each)
• Office supplies: $2,400 or $200 per month
• Other business equipment: $2,000
• Loan payment of $550 per month
• Salary drawn of $500 per month

Putting an Xin 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. 2 $ Direct Material Direct Labor Item/Cost Overhead Period Costs Fixed Variable X 2 Salary - Collar maker 3 Salary - Leash maker 4 Salary - Harness maker 5 Salary - Receptionist 6 High-tensile strength nylon webbing 7 Polyesterylon ribbons 8 Buckles made of cast hardware 9 Depreciation on sewing machines X:X:X 0 Rent X X 1 Utilities and insurance 2 Scissors, thread, and cording 3 Price tags 4 Office Supplies 5 Oter business equipment 6 Loan payment 7 Salary to self 8 9 X X