You plan to open a small business for manufacturing pet collars, leashes, and ha messes. 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 5550; 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 O One collar maker, who will be paid $16.00 per hour and work 40 hours per week O One leash maker, who will be paid 516.00 per hour and work 40 hours per week O One harness maker, who will be paid $17.00 per hour and work 40 hours per week O One receptionist, who will be paid $15.00 per hour and work 30 hours per week Other Costs O Rent: $750 per month; allocate based on square footage O High-tensile strength nylon webbing$12 per yard of webbing o 3 collars per ya rd of webbing o 2 leashes per yard of webbing o 2 harnesses per yard of webbing O Polyesterylon ribbons$9 per yard of ribbon o 3 collars per ya rd of ribbon o 2 leashes per yard of ribbon o 2 harnesses per yard of ribbon O Buckles made of cast hardware$0.50 per buckle o 4 buckles used per collar 0 3 buckles used per leash o 8 buckles used per harness O 3 industrial sewing machines at $3,300 each for a total of $9,900; depreciation is 5165 per month {5- year life, zero salvage value) O Utilities and insurance: $600 per month; allocate based on square footage O Scissors, thread, cording: $1,200 O Price tags: S250 for 2,500 ($0.10 each) O Office supplies: $2,400 or $200 per month O Other business equipment: $2,000 O Loan payment of $550 per month O Salary drawn of $500 per month Milestone Three - Statement of Cost of Goods Sold Beginning Work in Process Inventory S Direct Materials: Materials: Beginning 0 Add: Purchases for month of January Materials available for use Deduct: Ending materials Materials Used Direct Labor Overhead Total Costs Deduct: Ending Work in Process Inventory 0 Cost of Goods SoldTotal Revenue: Cost of goods sold Gross profit $ Expenses: General and administrative salaries Office supplies Other business equipment Total Expenses Net Income/LossMilestone Three - Variance Analysis Data for Variance Analysis: Budgeted Budgeted Actual Actual (Standard) (Standard) Hours/Qty Rate Hours/Otv Rate Labor Materials Variances for Collar Sales Favorable/ Variance Unfavorable Direct Labor Time Variance (Actual Hours - Standard Hours) x Standard Rate S Direct Labor Rate Variance (Actual Rate - Standard Rate) x Actual Hours S Direct Materials Quantity/Efficiency Variance (Actual Quantity - Standard Quantity) x Standard Price S Direct Materials Price Variance (Actual Price - Standard Price) x Actual Quantity SMilestone 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. Direct Direct Variable Item/Cost Material Labor Overhead Period Costs Fixed X Salary - Collar maker X X Salary - Leash maker X X Salary - Harness maker X X Salary - Receptionist X High-tensile strength nylon webbing X X Polyesterylon ribbons X X Buckles made of cast hardware X Depreciation on sewing machines X X X X Rent X X Utilities and insurance X Scissors, thread, and cording X X Price tags X Office supplies X Other business equipment X X 6 Loan payment X X Salary to self 8Milestone One - Variable and Fixed Costs Collars Item Variable Cost/Item Item Fixed Costs High-tensile strength nylon webbing 36.00 Collar maker's salary (monthly) 33,395.20 Polyesterylon ribbons 27.00 Depreciation on sewing machines 165.00 Buckles made of cast hardware 2.00 Rent 750.00 Price tags 0.10 Utilities and insurance 600.00 Scissors, thread, and cording 1,200.00 Loan payment 183.33 Salary to self 166.67 Total Variable Costs per Collar $ 65.10 Total Fixed Costs $ 36,460.20 Leashes Item Variable Cost/Item Item Fixed Costs High-tensile strength nylon webbing 24.00 Leash maker's salary (monthly) 33,395.20 Polyesterylon ribbons 18.00 Depreciation on sewing machines 165.00 Buckles made of cast hardware 1.50 Rent 750.00 Price tags 0.10 Utilities and insurance 600.00 Scissors, thread, and cording 1,200.00 Loan payment 183.33 Salary to self 166.67 Total Variable Costs per Leash $ 43.60 Total Fixed Costs $ 36,460.20 Harnesses Item Variable Cost/Item Item Fixed Costs 6 High-tensile strength nylon webbing 24.00 Harness maker's salary 35,482.40 7 Polyesterylon ribbons 18.00 Depreciation on sewing machines 165.00 18 Buckles made of cast hardware 4.00 Rent 750.00 19 Price tags 0.10 Utilities and insurance 600.00 Scissors, thread, and cording 1,200.00 Loan 183.33 Salary to self 166.67 54 55 57 Total Variable Costs per Harness $ 46.10 Total Fixed Costs $ 38,547.40Milestone Two - Contribution Margin Analysis COLLARS LEASHES HARNESSES Sales Price per Unit S 20.00 S 22.00 25.00 Variable Cost per Unit $9.10 $12.10 $14.60 Contribution Margin 10.80 $9.90 S 10.40COLLARS LEASHES HARNESSES Sales Price 20.00 22.00 25.00 Fixed Costs S 4,028 4,089 S 4,266 Contribution Margin 10.80 9.90 10.40 Break-Even Units (round up) 370 Units 413 Units 410 Units Target Profit S 300.00 400.00 500.00 Break-Even Units (round up) 397.00 453.00 458.00 Target Profit S 500.00 S 600.00 650.00 Break-Even Units (round up) 415.00 474.00 473.00