Scenario

Your business has been open for a month, and you have prepared an income statement and completed a variance analysis on the data. Now you will meet with investors and a few other internal stakeholders to share your companys progress over the past month and how it has performed with respect to your cost and budget projections. The investors would like to see the thought process behind your financial strategy and how your company has performed in its first month. They have therefore asked you to present a report that includes the costing and income data from your Project Workbook.

Directions

Submit a detailed report to your potential investors and other stakeholders to explain and defend your costing strategies and to share your businesss performance to date. Your report can be in the form of a PowerPoint presentation or a Word document (based on the templates provided in the What to Submit section). In either format, be sure to effectively communicate with your stakeholders by breaking down concepts and using investor-friendly language to build their trust and confidence. If you choose to do a PowerPoint presentation, youll need to include speaker notes for each slide.

1. Introduction: Provide a short overview of your company and the purpose of this report.
   1. Business Overview: Name your company and describe its business and your vision for its future.
   2. Purpose of the Report: Explain the purpose of the report and describe why the information is important.
   3. Methods and Approach: Explain the management accounting methods you used for generating the information that you are about to share in terms of your adherence to industry standards and the American Institute of Certified Public Accountants (AICPA) code of ethics.
2. Financial Strategy: Review your original business plan and costing strategies.
   1. Costing System: Justify the use of job order costing for this business. Be sure to compare and contrast the various costing systems you learned about in this course as part of your defense.
   2. Selling Prices: Share and explain the selling prices you established for each of your products. Be sure to reference your cost-volume-profit analysis in your defense.
   3. Contribution Margin: Share and explain your contribution margin per unit. Be sure to reference your cost-volume-profit analysis in your defense.
   4. Target Profits: Identify your break-even points for achieving different target profits. Then explain the target profits you selected for each area of your business. Be sure to reference your cost-volume-profit analysis in your defense.
3. Financial Statements: Using the information in the Milestone Two Market Research Data Appendix, assess your financial performance to date.
   1. Statement of Cost of Goods Sold: Share the statement of cost of goods sold and logically interpret the businesss performance against the provided benchmarks.
   2. Income Statement: Share the income statement and logically interpret the businesss performance against the provided benchmarks.
   3. Variances: Illustrate all variances for the direct labor time and the materials price.
   4. Significance of Variances: Evaluate the significance of the variances in terms of the potential to impact future budgeting decisions and planning

Milestone One - Variable and Fixed Costs Collars Item Item Fixed Costs High-tensile strength nylon webbing Polyesterylon ribbons Buckles made of cast hardware Price tags (given amount) Variable Cost/item $ 4.00 $ 3.00 $ 2.00 $ 0.10 Collar maker's salary (monthly) Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Loan payment Salary to self $ $ $ $ $ $ $ 2,773.33 55.00 250.00 200.00 400.00 183.33 166.67 Total Variable Costs per Collar $ 9.10 Total Fixed Costs $ 4,028.33 Leashes Item Fixed Costs Item Variable Cost/Item High-tensile strength nylon webbing $ 6.00 Polyesterylon ribbons S 4.50 Buckles made of cast hardware $ 1.50 Price tags (given amount) $ 0.10 Leash maker's salary (monthly) Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Loan payment Salary to self $ $ $ 2,773.33 55.00 250.00 200.00 400.00 183.33 $ $ 166.67 Total Variable Costs per Leash $ 12.10 Total Fixed Costs $ 4,028.33 Harnesses Item Variable Cost/Item Item Fixed Costs High-tensile strength nylon webbing $ Polyesterylon ribbons $ Buckles made of cast hardware $ Price tags (given amount) $ 6.00 4.50 4.00 0.10 Harness maker's salary Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Loan Salary to self $ $ $ $ $ $ 2,946.67 55.00 250.00 200.00 400.00 183.33 166.67 Total Variable Costs per Harness $ 14.60 Total Fixed Costs $ 4,201.67 Milestone Two - Contribution Margin Analysis COLLARS LEASHES HARNESSES $ $ 28.00 $ 30.00 $ Sales Price per Unit Variable Cost per Unit Contribution Margin 35.00 14.60 9.10 12.10 $ 18.90 $ 17.90 $ 20.40 Collars (Sale quantity * (Selling Price Per Unit - Variable Cost Per Unit)) 30 collars at $20 each 327 25 collars at $24 each 372.5 20 collars at $28 each 378 Leashes (Sale quantity * (Selling Price Per Unit - Variable Cost Per Unit)) 28 leashes at $22 each 23 leashes at $26 each 18 leashes at $30 each 277.2 319.7 322.2 Harnesses (Sale quantity * (Selling Price Per Unit - Variable Cost Per Unit)) 25 harnesses at $25 each 260 22 harnesses at $30 each 338.8 20 harnesses at $35 each 408 Milestone Two - Break-Even Analysis COLLARS LEASHES HARNESSES Sales Price $ 28.00 $ 30.00 $ 35.00 Fixed Costs $ 4,028 $ 4,028 $ 4,202 Contribution Margin $ 18.90 $ 17.90 $ 20.40 Break-Even Units (round up) 214 226 206 Target Profit $ 300.00 $ 400.00 $ 500.00 Break-Even Units (round up) 228.99 248.00 231.00 Target Profit $ 500.00 $ 600.00 $ 650.00 Break-Even Units (round up) 240 259 238 Milestone Three - Statement of Cost of Goods Sold 0 Beginning Work in Process Inventory Direct Materials: Materials: Beginning Add: Purchases for month of January 0 20,000 $ Materials available for use Deduct: Ending materials 20,000 (4,000) Materials Used $ 16,000 Direct Labor Overhead 8,493.33 3,765.00 Total Costs $ $ 28,258.33 Deduct: Ending Work in Process Inventory 0 Cost of Goods Sold $ 28,258.33 Milestone Three - Income Statement $ Revenue: Collars Leashes Harnesses 12,880.00 10,800.00 14,000.00 $ Total Revenue: Cost of goods sold Gross profit 37,680.00 (28,258.33) 9,421.67 $ $ Expenses: General and administrative salaries Depreciation Rent Utilities and insurance Scissors, thread, and cording Loan 2,450.00 $ (165.00) $ (750.00) $ (600.00) $ (1,200.00) (550.00) Total Expenses $ (5,715.00) Net Income/Loss $ 3,706.67 Milestone Three - Variance Analysis Data for Variance Analysis: Budgeted (Standard) Hours/Qty Budgeted (Standard) Rate Actual Hours/Qty Actual Rate Labor 160 $ 16.00 180 $ 16.50 Materials 560$ 9.10 620 $ 10.00 Variances for Collar Sales Favorable/ Unfavorable Variance Direct Labor Time Variance (Actual Hours - Standard Hours) x Standard Rate $ 320.00 Unfavorable Direct Labor Rate Variance (Actual Rate - Standard Rate) x Actual Hours $ 90.00 Unfavorable Direct Materials Quantity/Efficiency Variance (Actual Quantity - Standard Quantity) x Standard Price $ 546.00 Unfavorable Direct Materials Price Variance (Actual Price - Standard Price) x Actual Quantity $ 558.00 Favorable