Specifically, you must address the following rubric criteria: Contribution Margin. Determine your contribution margin per unit in the Contribution Margin Analysis" tab. o Choose a sales price for each product. o Calculate the contribution margin for each product based on your sales price and the variable cost for that product. Show your work using calculations to the side of the table or using appropriate formulas in the table. Break-Even Analysis. Use cost-volume-profit (CVP) analysis to determine your break-even points for achieving your target profits in the "Break-Even Analysis" tab. o Determine the break-even points for each product. Show your work using calculations to the side of the table or using appropriate formulas in the table. o Determine break-even units for the suggested target profits for each product. Show your work using calculations to the side of the table or using appropriate formulas in the table. 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 o 3 collars per yard of webbing o 2 leashes per yard of webbing o 2 harnesses per yard of webbing Polyesterylon ribbons,$9 per yard of ribbon o 3 collars per yard of webbing o 2 leashes per yard of webbing o 2 harnesses per yard of webbing Buckles made of cast hardware-$0.50 per buckle o 4 buckles used per collar o 3 buckles used per leash o 8 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 . . . 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 o With pricing at $20 per collar, you can expect to sell 30 collars per day. o With pricing at $24 per collar, you can expect to sell 25 collars per day. o With pricing at $28 per collar, you can expect to sell 20 collars per day Leashes o With pricing at $22 per leash, you can expect to sell 28 leashes per day. o With pricing at $26 per leash, you can expect to sell 23 leashes per day. o With pricing at $30 per leash, you can expect to sell 18 leashes per day. Harnesses o With pricing at $25 per harness, you can expect to sell 25 harnesses per day. o With pricing at $30 per harness, you can expect to sell 22 harnesses per day. o 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 o Break-even o $300 target profit each month o $500 target profit each month Leashes o Break-even o $400 target profit each month o $600 target profit each month Harnesses o Break-even o $500 target profit each month o $650 target profit each month Collars Item Variable Cost/Item Item Fixed Costs 4.00 High-tensile strength nylon webbing $ Polyesterylon ribbons $ Buckles made of cast hardware $ Price tags $ 3.00 2.00 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 0.10 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 $ 4.50 Buckles made of cast hardware $ 1.50 Price tags $ 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 Item Fixed Costs 6.00 Harnesses Item Variable Cost/Item High-tensile strength nylon webbing $ Polyesterylon ribbons $ 4.50 Buckles made of cast hardware $ 4.00 Price tags $ 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 Sales Price per Unit Variable Cost per Unit Contribution Margin Milestone Two - Break-Even Analysis COLLARS LEASHES HARNESSES Sales Price $ $ $ Fixed Costs $ $ $ Contribution Margin $ $ $ Break-Even Units (round up) Target Profit $ 300.00 $ 400.00 $ 500.00 Break-Even Units (round up) Target Profit $ 500.00 $ 600.00 $ 650.00 Break-Even Units (round up)
