Overview

Successful entrepreneurs understand all aspects of business, especially costs and costing systems. In the course project, you will assume the role of the owner of a small business and apply managerial accounting principles to evaluate and manage costs related to your services within a costing system. In the first milestone of the project, you will determine and classify the costs necessary for opening your business.

Scenario

You plan to open a business manufacturing collars, leashes, and harnesses for pets. To begin, you will manufacture these in a standard style and size with plans to expand your range over the year. In a few weeks, you will present your companys financial strategy to some key investors. To begin creating your strategy, you need to consider and record all the costs associated with operating your business. You have decided to use the job order costing system.

Prompt

Use the given operational costs in the Milestone One Operational Costs Data Appendix Word Document to complete the first two tabs, Cost Classification and Variable and Fixed Costs, in the Project Workbook Spreadsheet.

Specifically, you must address the following rubric criteria:

• Cost Classification. Accurately classify all your costs in the Cost Classification tab of your workbook.
  • Identify direct material, direct labor, overhead, and period costs. (Note: Fixed and variable costs have been classified for you.)
• Variable and Fixed Costs. Complete the Variable and Fixed Costs tab of your workbook. (Note: Some costs are provided for you. Fill in only the missing costs.)
  • Determine your total variable cost per unit and the total fixed costs for each product. Show your work using calculations to the side of the table or using appropriate formulas in the table.

What to Submit

Submit the Project Workbook with the Cost Classification and Fixed and Variable Costs tabs completed. This file should be completed and submitted using Microsoft Excel.

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.
Item/Cost	Direct Material	Direct Labor	Overhead	Period Costs	Fixed	Variable
Salary - Collar maker						x
Salary - Leash maker						x
Salary - Harness maker						x
Salary - Receptionist
High-tensile strength nylon webbing						x
Polyester/nylon ribbons						x
Buckles made of cast hardware						x
Depreciation on sewing machines					x
Rent					x
Utilities and insurance					x
Scissors, thread, and cording					x
Price tags						x
Office supplies
Other business equipment
Loan payment					x
Salary to self					x

Milestone One - Variable and Fixed Costs
Collars
Item	Variable Cost/Item		Item	Fixed Costs
High-tensile strength nylon webbing	$ 4.00		Collar maker's salary (monthly)	$ 2,773.33
Polyester/nylon ribbons			Depreciation on sewing machines
Buckles made of cast hardware			Rent
Price tags			Utilities and insurance
			Scissors, thread, and cording
			Loan payment	$ 183.33
			Salary to self	$ 166.67
Total Variable Costs per Collar			Total Fixed Costs
Leashes
Item	Variable Cost/Item		Item	Fixed Costs
High-tensile strength nylon webbing			Leash maker's salary (monthly)
Polyester/nylon ribbons			Depreciation on sewing machines
Buckles made of cast hardware			Rent
Price tags			Utilities and insurance
			Scissors, thread, and cording
			Loan payment
			Salary to self
Total Variable Costs per Leash			Total Fixed Costs
Harnesses
Item	Variable Cost/Item		Item	Fixed Costs
High-tensile strength nylon webbing			Harness maker's salary
Polyester/nylon ribbons			Depreciation on sewing machines
Buckles made of cast hardware			Rent
Price tags			Utilities and insurance
			Scissors, thread, and cording
			Loan
			Salary to self
Total Variable Costs per Harness			Total Fixed Costs