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

oWith pricing at $20 per collar, you can expect to sell 30 collars per day.

oWith pricing at $24 per collar, you can expect to sell 25 collars per day.

oWith pricing at $28 per collar, you can expect to sell 20 collars per day

Leashes

oWith pricing at $22 per leash, you can expect to sell 28 leashes per day.

oWith pricing at $26 per leash, you can expect to sell 23 leashes per day.

oWith pricing at $30 per leash, you can expect to sell 18 leashes per day.

Harnesses

oWith pricing at $25 per harness, you can expect to sell 25 harnesses per day.

oWith pricing at $30 per harness, you can expect to sell 22 harnesses per day.

oWith 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

oBreak-even

o$300 target profit each month

o$500 target profit each month

Leashes

oBreak-even

o$400 target profit each month

o$600 target profit each month

Harnesses

oBreak-even

o$500 target profit each month

o$650 target profit each month

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

o3 collars per yard of webbing

o2 leashes per yard of webbing

o2 harnesses per yard of webbing

Polyesterylon ribbons$9 per yard of ribbon

o3 collars per yard of webbing

o2 leashes per yard of webbing

o2 harnesses per yard of webbing

Buckles made of cast hardware$0.50 per buckle

o4 buckles used per collar

o3 buckles used per leash

o8 buckles used per harness

3 industrial sewing machines at $3,300 each for a total of $9,900; depreciation is $165 per month (5-year life)

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

Scenario

It has now been one month since you launched your business. You are meeting with a few investors soon to share your vision for the company and to ask for more funding. You will be sharing your company's financial health at this meeting. To do that, you need to determine and analyze your company's performance over the last month using the data provided.

Prompt

Use the information in theMilestone Three Actual Costs and Revenue Data Appendix Word Documentto evaluate your company's performance, and complete the remaining tabs in theProject Workbook Spreadsheetthat you used for the Milestone One and Two assignments.

Specifically, you must address the following rubric criteria:

• Statement of Cost of Goods Sold: Prepare the statement of cost of goods sold in the "COGS" tab of the workbook. Remember to show your work using calculations to the side of the table or using appropriate formulas in the table.
• Income Statement: Use the given revenue data to prepare the "Income Statement" tab table and calculate the net income. Remember to show your work using calculations to the side of the table or using appropriate formulas in the table.
• Variance Analysis: Prepare the data in the "Variances" tab to determine whether the variances are favorable or unfavorable. Remember to show your work using calculations to the side of the table or using appropriate formulas in the table.
• Complete thedata tablefor the variances by entering the budgeted (standard) and actual labor and material values. Remember to use the estimates for expected sales from your Milestone Two assignment.
• Determine thevariancesfor direct labor and direct materials in the "Variances" tab.
• Evaluate thesignificance of the variancesin the "Variances" tab, and mark them as favorable or unfavorable.

lMilestone Two Break-Even ALIIaIysis COLLARS LEASHES HARNESSES Sales Price S S S Fixed Costs Contribution Margin S S S BreakEven Units (round up) Target Prot S 300.00 S 400.00 S 500.00 BreakEven Units (round up) Target Prot S 500.00 S 600.00 S 650.00 BreakEven Units (round up) 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 Milestone Two - Contribution Lillargin Analysis COLLARS LEASHES HARNESSES Sales Price per Unit Variable Cost per Unit Contribution Margin Milestone One - Cost Classification INSTRUCTIONS: Putting an X in the appropriate spot, classify the costs as: Direct Material, Direct Labor, Overhead, or Period Costs. The Fixed and Variable cost classifications have been provided for you. Direct Direct Item/Cost Material Labor Overhead Period Costs Fixed Variable Salary - Collar maker X X - . . .... - . ............." Salary - Leash maker X X Salary - Harness maker X X Salary - Receptionist X High-tensile strength nylon webbing X X Polyesterylon ribbons X X Buckles made of cast hardware X X -. . . ...... Depreciation on sewing machines X X Rent X X -. ..... -. . . .... Utilities and insurance X X Scissors, thread, and cording X X Price tags X X - . . . . . .: Office supplies X Oter business equipment X Loan payment X X -....... Salary to self X X Cost Classification Variable and Fixed Costs Contribution Margin Analysis Break-Even Analysis COGS Income Statement eady Scroll LockMilestone Three - Income Statement Revenue: Collars Leashes Harnesses mlmlwlmlmlb w'w 'H Total Revenue: 11 Cost of goods sold 12 Gross profit H 14 Expenses: 15 General and administrative salaries 15 Depreciation 2 Rent 3 Utilities and insurance E Scissors, thread, and cording a Loan g E Total Expenses a i Net Income/Loss g a El 29 4 > llll $1 Ready Scroll Lock