Klean Steppers A group of students at the University of Technology, Jamaica recently won an award in the annual UTech, Ja Business Model Competition for their invention, a white dirt-proof sneaker for children in kindergarten. This invention arose from complaints from parents about having to buy white sneakers for their child children for physical education that soils easily. As a result of the invention, the students decided to start a business, "Klean Steppers' to start production. The sneakers have an innovative design and are made of a robust leather and cushioning material, which heightens the resistance to dirt and dust. The following information was discussed at a meeting with the Klean Steppers team. Sales and collections The sneakers are designed for girls and boys. Details of selling prices and projected sales in pairs of sneakers for the four-month period are shown below: Type Selling price Girls Boys $2500 $2900 Months August September 290 320 230 280 July 250 195 October 190 160 It is expected that all sales will be on credit to department stores in Jamaica. It is estimated that 30% of customers will pay within one month while the remaining customers will pay the month following sale. Production Production of sneakers will be based on sales demand. The company requires a closing inventory of 20% of the next month's budgeted sales in pairs of sneakers for girls and boys. There is no opening stock of inventory Manufacturing Overheads (d) The following manufacturing overheads are budgeted for the quarter. Indirect material Indirect labour Other overhead Depreciation July $10,200 $4,800 $3,100 $1,800 August $11,200 $4,120 $2,400 $1,800 September $12,200 $4,280 $2,700 $1,800 In addition to the above overheads the following costs will be incurred: (e) The company has signed a rental agreement for the production facility. The annual rental charge will be $360,000, which will be paid in equal monthly instalments. A security deposit amounting to $25,000 must also be paid in July. (1) Other operating costs including power, insurance, and administration expenses, which must be paid monthly, are expected to be $93,600 for the year. Klean Steppers A group of students at the University of Technology, Jamaica recently won an award in the annual UTech, Ja Business Model Competition for their invention, a white dirt-proof sneaker for children in kindergarten. This invention arose from complaints from parents about having to buy white sneakers for their child children for physical education that soils easily. As a result of the invention, the students decided to start a business, "Klean Steppers' to start production. The sneakers have an innovative design and are made of a robust leather and cushioning material, which heightens the resistance to dirt and dust. The following information was discussed at a meeting with the Klean Steppers team. Sales and collections The sneakers are designed for girls and boys. Details of selling prices and projected sales in pairs of sneakers for the four-month period are shown below: Type Selling price Girls Boys $2500 $2900 Months August September 290 320 230 280 July 250 195 October 190 160 It is expected that all sales will be on credit to department stores in Jamaica. It is estimated that 30% of customers will pay within one month while the remaining customers will pay the month following sale. Production Production of sneakers will be based on sales demand. The company requires a closing inventory of 20% of the next month's budgeted sales in pairs of sneakers for girls and boys. There is no opening stock of inventory Manufacturing Overheads (d) The following manufacturing overheads are budgeted for the quarter. Indirect material Indirect labour Other overhead Depreciation July $10,200 $4,800 $3,100 $1,800 August $11,200 $4,120 $2,400 $1,800 September $12,200 $4,280 $2,700 $1,800 In addition to the above overheads the following costs will be incurred: (e) The company has signed a rental agreement for the production facility. The annual rental charge will be $360,000, which will be paid in equal monthly instalments. A security deposit amounting to $25,000 must also be paid in July. (1) Other operating costs including power, insurance, and administration expenses, which must be paid monthly, are expected to be $93,600 for the year
