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ACC 202 Milestone One: Operational Costs Data Appendix 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 (5year life, zero salvage value) - 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 \# 2: Market Research Data You have conducted some market research for style and size of products you want to use to launch your business. The market research has indicated the following sales price ranges will be optimal for your area depending on style of products you choose to sell: - Collars - With pricing at $20 per collar, you can expect to sell 30 collars per day. - With pricing at $24 per collar, you can expect to sell 25 collars per day. - With pricing at $28 per collar, you can expect to sell 20 collars per day - Leashes - With pricing at $22 per leash, you can expect to sell 28 leashes per day. - With pricing at $26 per leash, you can expect to sell 23 leashes per day. - With pricing at $30 per leash, you can expect to sell 18 leashes per day. - Harnesses - With pricing at $25 per harness, you can expect to sell 25 harnesses per day. - With pricing at $30 per harness, you can expect to sell 22 harnesses per day. - With pricing at $35 per harness, you can expect to sell 20 harnesses per day. Additionally, you will need to compare your break-even points for the following target profits for each area of your business to determine your prices: - Collars - Break-even - $300 target profit each month - $500 target profit each month - Leashes - Break-even - $400 target profit each month - $600 target profit each month - Harnesses O Break-even - $500 target profit each month - $650 target profit each month Remember that all break-even and target points must be in whole units (we cannot sell a partial unit). Round up when calculating partial units to ensure costs are covered. Excel tip - use ROUNDUP function 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 3320=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 1 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 Three - Statement of Cost of Goods Sold Revenue: Collars Leashes Harnesses Total Revenue: 11 Cost of goods sold 12 Gross profit 13 14 Expenses: 15 General and administrative salaries Office supplies Other business equipment Total Expenses Net Income/Loss ACC 202 Milestone One: Operational Costs Data Appendix 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 (5year life, zero salvage value) - 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 \# 2: Market Research Data You have conducted some market research for style and size of products you want to use to launch your business. The market research has indicated the following sales price ranges will be optimal for your area depending on style of products you choose to sell: - Collars - With pricing at $20 per collar, you can expect to sell 30 collars per day. - With pricing at $24 per collar, you can expect to sell 25 collars per day. - With pricing at $28 per collar, you can expect to sell 20 collars per day - Leashes - With pricing at $22 per leash, you can expect to sell 28 leashes per day. - With pricing at $26 per leash, you can expect to sell 23 leashes per day. - With pricing at $30 per leash, you can expect to sell 18 leashes per day. - Harnesses - With pricing at $25 per harness, you can expect to sell 25 harnesses per day. - With pricing at $30 per harness, you can expect to sell 22 harnesses per day. - With pricing at $35 per harness, you can expect to sell 20 harnesses per day. Additionally, you will need to compare your break-even points for the following target profits for each area of your business to determine your prices: - Collars - Break-even - $300 target profit each month - $500 target profit each month - Leashes - Break-even - $400 target profit each month - $600 target profit each month - Harnesses O Break-even - $500 target profit each month - $650 target profit each month Remember that all break-even and target points must be in whole units (we cannot sell a partial unit). Round up when calculating partial units to ensure costs are covered. Excel tip - use ROUNDUP function 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 3320=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 1 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 Three - Statement of Cost of Goods Sold Revenue: Collars Leashes Harnesses Total Revenue: 11 Cost of goods sold 12 Gross profit 13 14 Expenses: 15 General and administrative salaries Office supplies Other business equipment Total Expenses Net Income/Loss