$**$Please make sure to show all you qork inclusing the equations tha derived these answers. This is part $1$ of the porblme. There is a part $2$ on another question. Please try to make the product something unique.$**$

Overview: For this assignment, you will select a product to make $-$it can be anything so long

as you understand the manufacturing process and costs involved in making the product. Think

of a hobby that you have or watch some DIY videos on YouTube for ideas. Then you will break

down the costs into the cost classifications we have covered in class and finally determine a

selling price for your creation. Have fun!

$1.)$ Product: What product did you decide to manufacture: $\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_$

Provide a brief description if necessary.

$2.)$ Direct Materials: What are the direct materials involved in making your product?

$2$a$.)$ Direct Material Cost: What is the direct material cost to make one unit of your

product? Show your calculations here or attach a separate page $($you may use spreadsheets to

perform your calculations if you prefer$).$ Remember to include any sales tax you pay on your

direct material purchases.

$3.)$ Direct Labor: How long does it take you to make one product?

Please note this should only include manufacturing time, the time to make your product. It

should not include setup or clean$-$up time as that will appear under Indirect Labor.

$3$a$.)$ Direct Labor Cost: What is the direct labor cost to make one unit of your

product? Show your calculations here or attach a separate page $($you may use spreadsheets to

perform your calculations if you prefer$).$ In computing your wage rate use the rate you are

currently paid, if you have other employment $($after all this would be your opportunity cost$).$ If

you are not currently employed, then use the minimum wage for the county you reside in$.$ For

the purpose of this assignment just use the gross pay per hour do not adjust for taxes.

$4.)$ Manufacturing Overhead: What are your manufacturing overhead costs?

This includes all other manufacturing costs besides direct materials and direct labor but does not

include period costs like selling and administrative. Examples are indirect materials, indirect

labor, rent, utilities, etc. For example, that labor time to setup or clean up your manufacturing

area that you didn$$t include in direct labor $-$include it here. Are there supplies you use? Include it

here. And, for the purpose of this exercise, please include rent and utilities here. We will review

this in class, but you will use square footage to calculate your rent and utilities as they relate to

your business. Again, feel free to attach a separate workpaper or spreadsheet to show these

calculations.

Total Manufacturing Cost per unit $$\_\_\_\_\_\_\_$

Period Costs

$5.)$ Sales Strategy: Where will you sell your product?

$5$a$.)$ Selling Cost: What are your selling costs per month given your sales strategy?

$$\_\_\_\_\_\_\_$

Remember to include any time you spend on sales $-$creating social media content,

packaging products for shipment, or time to sell your product at a Farmer$$s market for

example. Use the same labor rate you did in number $3$ for this time.

$6.)$ Administrative Support: What kind of support is needed for your business?

$6$a$.)$ Administrative cost: What are your administrative costs per month?

$$\_\_\_\_\_\_\_$

You must have something here! At the very least, estimate $1$ hour of administrative

support per month at your direct labor rate used in item $3.$

$7.)$ Calculate per unit. Figures from $5$a and $6$a are a monthly total. Determine how many

units you expect to make in a month $($keep it realistic since you cannot devote all your

time to making your product$).$ Then divide your total period costs $($sum of $5$a and $6$a$)$ by

your estimated monthly units of production.

Total Selling & Administrative Cost per unit $$\_\_\_\_\_\_\_$

Price

$8.)$ Setting Product Price: Use the cost$-$plus method to compute the selling price for your

product. For formula for the cost$-$plus method is:

Total Cost per unit $+$ Markup per unit $=$ Selling Price per unit

A few things to note with this formula:

Total cost per unit is the sum of your total manufacturing costs per unit $+$ total selling &

administrative costs per unit.

Markup should reflect your desired profit on each unit sold. Please note that you are free to

determine your desired profit $-$it is totally up to you! Just make sure to tell me why you

selected this amount $-$was it because this is how much you need to make a living? Because you

wanted a selling price that was comparable to similar products? Just tell me your rationale for

your selected profit amount.

Selling Price per unit $$\_\_\_\_\_\_\_$

$9.)$ Q&A

a$.)$ What was the rationale for your markup amount?

b$.)$ Do you think your final selling price is reasonable? How does it compare to other

similar products?

c$.)$ If you were not satisfied with your selling price, what could you do to change it$?$

d$.)$ What was your single largest cost in making this product? Did that surprise you?