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ACC 202 Milestone One: Operational Costs Data Appendix

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
  • 3 collars per yard of webbing
  • 2 leashes per yard of webbing
  • 2 harnesses per yard of webbing
• Polyesterylon ribbons$9 per yard of ribbon
  • 3 collars per yard of webbing
  • 2 leashes per yard of webbing
  • 2 harnesses per yard of webbing
• Buckles made of cast hardware$0.50 per buckle
  • 4 buckles used per collar
  • 3 buckles used per leash
  • 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

2 Milestone One - Cost Classification 3 4 5 INSTRUCTIONS: 6 Putting an X in the appropriate spot, classify the costs as: Direct Material, Direct Labor, Overhead, or Period Costs. 7 The Fixed and Variable cost classifications have been provided for you. 8 Direct Material Item/Cost Direct Labor 9 Overhead Period Costs Fixed Variable XXX 12 Salary - Collar maker 13 Salary - Leash maker 14 Salary - Harness maker 15 Salary - Receptionist 16 High-tensile strength nylon webbing 17 Polyesterylon ribbons 18 Buckles made of cast hardware 19 Depreciation on sewing machines 20 Rent 21 Utilities and insurance 22 Scissors, thread, and cording 23 Price tags 24 Office supplies 25 Oter business equipment 26 Loan payment 27 Salary to self 28 29 Fixed Costs 2,773.33 $ 2 Milestone One - Variable and Fixed Costs 3 4 5 Collars 7 Item Variable Cost/Item 9 High-tensile strength nylon webbir $ 4.00 10 Polyesterylon ribbons 11 Buckles made of cast hardware 12 Price tags 13 14 15 16 17 19 Total Variable Costs per Collar 20 Item Collar maker's salary(monthly) Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Loan payment Salary to self $ $ 183.33 166.67 Total Fixed Costs Fixed Costs Item Leash maker's salary (monthly) Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Loan payment Salary to self Total Fixed Costs 22 23 Leashes 25 Item Variable Cost/Item 27 High-tensile strength nylon webbing 28 Polyesterylon ribbons 29 Buckles made of cast hardware 30 Price tags 31 32 33 34 35 36 38 Total Variable Costs per Leash 39 41 42 Harnesses 44 Item Variable Cost/Item 46 High-tensile strength nylon webbing 47 Polyesterylon ribbons 48 Buckles made of cast hardware 49 Price tags 50 51 52 53 54 55 57 Total Variable Costs per Harness 58 Item Fixed Costs Harness maker's salary Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Loan Salary to self Total Fixed Costs 60 3 Milestone Two - Contribution Margin Analysis 4 COLLARS LEASHES HARNESSES 5 6 8 Sales Price per Unit 9 Variable Cost per Unit 11 Contribution Margin 12 Milestone Two - Break-Even Aralysis w N COLLARS LEASHES HARNESSES Sales Price $ $ 3 4 5 7 8 9 10 11 12 13 14 Fixed Costs $ $ $ Contribution Margin $ $ Break-Even Units (round up) Target Profit 300.00 $ 400.00 $ 500.00 16 17 18 19 20 Break-Even Units (round up) Target Profit $ 500.00 $ 600.00 $ 650.00 22 23 24 25 26 Break-Even Units (round up) 0 0 1 2 Milestone Three - Statement of Cost of Goods Sold 3 4 6 Beginning Work in Process Inventory 7 Direct Materials: 8 Materials: Beginning 9 Add: Purchases for month of January 11 Materials available for use 12 Deduct: Ending materials 14 Materials Used 15 16 Direct Labor 17 Overhead 19 Total Costs 20 21 Deduct: Ending Work in Process Inventory 22 23 Cost of Goods Sold 24 0 $ $ $ 2 Milestone Three - Income Statement 3 4 5 Revenue: 6 Collars 7 Leashes 8 Harnesses 9 10 Total Revenue: 11 Cost of goods sold 12 Gross profit 13 14 Expenses: 15 General and administrative salaries 16 Depreciation 17 Rent 18 Utilities and insurance 19 Scissors, thread, and cording 20 Loan 21 22 Total Expenses 23 24 Net Income/Loss 25 26 27 $ $ $ 29 1 2 Milestone Three - Variance Analysis Hemi 5 Data for Variance Analysis: Budgeted (Standard) Hours/Qty Budgeted (Standard) Rate Actual Hours/Qty Actual Rate 6 7 8 Labor 9 10 11 Materials 12 13 14 15 Variances for Collar Sales Favorable/ Unfavorable Variance 18 16 17 Direct Labor Time Variance (Actual Hours - Standard Hours) x Standard Rate 19 20 Direct Labor Rate Variance 21 (Actual Rate - Standard Rate) x Actual Hours 22 23 Direct Materials Quantity/Efficiency Variance 24 (Actual Quantity - Standard Quantity) x Standard Price 25 26 Direct Materials Price Variance 27 (Actual Price - Standard Price) Actual Quantity 28 29