Develop the full cost of a simple item.

1. Choose a simple, everyday household item (i.e. loaf of bread, fabric placemat, broom) to investigate its full cost.

2. Describe the product and why it was chosen.

3. Identify all direct and indirect materials used in production.

4. Identify the different production stages and the labor requirements for each stage.

5. Calculate the overhead.

6. You will use the material, labor, and overhead amounts to calculate the production cost per unit.

7. Find the selling price for your product.

8. Assumptions:

a. Production will be in your personal kitchen or workshop, therefore no rent expense will be incurred.

b. Use the fixed amount of $100 per month for the additional utilities expense that will be incurred in the production of your product.

c. No additional major machinery/equipment will need to be purchased. Small tools and equipment such as hammers or cookie sheets may be lumped together. They will be considered to have a limited one year life with no salvage value.

d. The federal minimum wage should be used as the labor cost per hour.

e. Assume no indirect labor.

9. Requirements:

a. Written portion of the project should be 5-6 pages, including the spreadsheets (but not including the cover page)

b. Written portion to include:

i. Why product was chosen?

ii. How cost was derived (where materials were obtained, etc.)?

iii. How was price determined?

iv. Why your classmates should purchase your product? (Sell it – this part should be fun!)

Find the direct material cost.

Direct Material Size of Package Cost for Entire Container Unit Size Cost per Unit

Example: flour 5 lbs/22.5 cups $2,50 1 cup $0,11