ing information. A number of assumptions are Instructions Set up fivepes of costs that would likely be involved in making this product columns as indicated Product Costs Direct Labor Manufacturing Overhead Period Costs Direct Materials Item Classify the costs you identified in (a) into the rina overhead) (direct materials, direct labor, and manufactu entified in (a) into the manufacturing cost classifications of ly dollar figures to the costs you identified in (a) and (b) e no raw materials or work in process beginning or ending inventories. Pre manufactured schedule for the first month of operations. (c) Assign hypothetical monthly figures (d) Assume you have materi pare ompute the to a projected cost of good cost to umber of helmets you expect to produce the first month of operations. Computet part (c) and adj number of helmets you expe to produce o ensure i rn one bicycle helmet. Review the result to ensure it is reasonable; if not, retu ust the monthly dollar figures you assigned accordingly. accounting system will you likely use- -job order or process costing? would assign costs in either the job order or process costing system t type of cost in how you would assign Continuing Problems 118 as cither variable or fixed costs. For simplicity, assign all costs to there are no mixed costs, using the format shown. suming there are no mixed co (h) Classily yo to use Item Variable Costs to either Fixed Costs riable cost, using the production number you determined in G of helmets you anticipate selling the first month of opera ute both the contribution margin pe e the unit va Compute the unit Project the number c Total Costs comic tribution margin pe e) ng pri ine your break-even point in dollars and in u uring overp turing ssumptions for each of the following tions. Set a unit sell r unit and the contribution margin ratio. rojected operating budgets (sales, production, direct materials, direct labor, manufac- () Prepare overhead, selling and administrative expense , and income statement). You will need to materials budget: Quantity of direct materials required to produce one helmet, cost per unit of quantity; desired ending direct materials (assume none Direct labor time required per helmet; direct labor cost per Income tax expense is 45% of income from operations. Direct labor budget: d income statement Prep tomers a cash budget for the month. Assume the percentage of sales that will be co is 75%, and the percentage of direct materials that will b paid in the current month is 75 Determine a relevant range of activity, using the number of helmets produced as your activity index. Recast your manufacturing overhead budget into a flexible monthly budget for two addi- tional activity levels. dentify one potential cause of materials, direct labor, and manufacturing overhead variances for your product. Assume that you wish to purchase production equipment that payback period, utilizing the monthly cash flow that you computed in part (m) multiplied by 12 months (for simplicity) costs $720,000. Determine the cash n (g) Identify any nonfinancial factors that should be considered before commencing your business venture. Other Info 1-Bicycle Helmet Company's selling price is $40.00 per device. 2-Each helmet requires 1I kilogram (KG) of material, at a unit cost of $7.00 per kg, to produce. 3-It takes 0.35 direct labor hours to produce one helmet, at a unit price of $20 per hour. 4-Income tax expense is 45% of income from operation. S-The types of manufacturing and period costs that would be incurred in making helmet, and assumed total dollar amounts are as follows: a. Rent on production equipment: $6,000 b. Insurance on factory building: S1,500 c. Raw Materials: $70,000 d. Utility costs for the factory: $900 e. Office supplies: $300 f Direct labor: $70,000 Depreciation on office equipment: 5800 h. Miscellaneous manufacturing items: $1,000 i. Administrative salaries: $15,500 j Property taxes on factory building: $400 k. Advertising for the Helmets:$11,000 L. Sales commissions: $40,000 m. Depreciation on factory building: $1.500 n. Professional fees: $500 o. Research and development: $10,000