Milestone Two: 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
  • 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

Milestone One - Variable and Fixed Costs Collars Item High-tensile strength nylon webbing $ Polyesterylon ribbons $ Buckles made of cast hardware Price tags Total Variable Costs per Coll Leashes Item High-tensile strength nylon webbing $ Polyesterylon ribbons $ Buckles made of cast hardware $ Price tags $ Total Variable Costs per Lea $ Harnesses Item High-tensile strength nylon webbing $ Polyesterylon ribbons $ Buckles made of cast hardware $ Price tags $ Total Variable Costs per Har $ ariable Costiltem 4.00 3.00 2.00 0.10 9.10 ariable Cost/ltem 6.00 4.50 1.50 0.10 49 49 49 $ $ 12.10 ariable Cost/ltem 6.00 4.50 4.00 0.10 14.60 Item Collar maker's salary (monthly) Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Loan payment Salary to self Total Fixed Costs Item Leash maker's salary (monthly) Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Loan payment Salary to self Total Fixed Costs Item Harness maker's salary Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Loan Salary to self Total Fixed Costs Fixed Costs $ 2,773.33 $ 55.00 $ 250.00 $ 200.00 $ 400.00 $ 183.33 $ 166.67 $ 4,028.33 Fixed Costs $ 2,773.33 55.00 250.00 200.00 400.00 183.33 166.67 $ 4,028.33 Fixed Costs $ $ $ 2,946.67 55.00 250.00 200.00 400.00 $ $ $ 183.33 $ 166.67 $ 4,201.67 $ $ $ $ $ $ Milestone Two - Contribution Margin Analysis COLLARS Sales Price per Unit Variable Cost per Unit Contribution Margin LEASHES HARNESSES Milestone Two - Break-Even Analysis Sales Price Fixed Costs Contribution Margin Break-Even Units (round up) Target Profit Break-Even Units (round up) Target Profit Break-Even Units (round up) $ $ $ $ $ COLLARS 300.00 500.00 $ $ $ $ $ LEASHES 400.00 600.00 in $ $ $ $ $ HARNESSES 500.00 650.00 Milestone Three - Statement of Cost of Goods Sold Beginning Work in Process Inventory Direct Materials: Materials: Beginning Add: Purchases for month of January Materials available for use Deduct: Ending materials Materials Used Direct Labor Overhead Total Costs Deduct: Ending Work in Process Inventory Cost of Goods Sold 0 $ 0 Milestone Three - Income Statement Revenue: Collars Leashes Harnesses Total Revenue: Cost of goods sold Gross profit Expenses: General and administrative salaries Office supplies Other business equipment Total Expenses Net Income/Loss $ $ $ $ 10 A B Milestone Three - Variance Analysis Data for Variance Analysis: Budgeted (Standard) Hours/Qty Labor Materials = 5 Variances for Collar Sales Direct Labor Time Variance B (Actual Hours - Standard Hours) x Standard Rate Direct Labor Rate Variance (Actual Rate - Standard Rate) x Actual Hours 3 Direct Materials Quantity/Efficiency Variance (Actual Quantity - Standard Quantity) x Standard Price 5 5 Direct Materials Price Variance (Actual Price - Standard Price) x Actual Quantity B Budgeted (Standard) Rate $ $ $ is D Actual Hours/Qty Variance E Actual Rate Favorable/ Unfavorable F