ACC 202 SNHU Cost Clarification Worksheet

ACC 202 Milestone One: Operational Costs Data AppendixYou 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
• Polyester/nylon ribbons—$9 per yard of ribbon
o 3 collars per yard of ribbon
o 2 leashes per yard of ribbon
o 2 harnesses per yard of ribbon
• 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 (5year life, zero salvage value)
• 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
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Milestone 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.
Item/Cost
Direct
Material
Direct
Labor
Overhead
Period Costs
Fixed
Variable
Salary – Collar maker
x
Salary – Leash maker
x
Salary – Harness maker
x
Salary – Receptionist
High-tensile strength nylon webbing
x
Polyester/nylon ribbons
x
Buckles made of cast hardware
x
Depreciation on sewing machines
x
Rent
x
Utilities and insurance
x
Scissors, thread, and cording
x
x
Price tags
Office supplies
Other business equipment
Loan payment
x
Salary to self
x
ACC202 – MANAGERIAL ACCOUNTING
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Milestone One – Variable and Fixed Costs
Collars
Item
Variable Cost/Item
Item
High-tensile strength nylon webbing
Polyester/nylon ribbons
Buckles made of cast hardware
Price tags
$
Collar maker’s salary (monthly)
Depreciation on sewing machines
Rent
Utilities and insurance
Scissors, thread, and cording
Loan payment
Salary to self
4.00
Total Variable Costs per Collar
Fixed Costs
$
2,773.33
$
$
183.33
166.67
Total Fixed Costs
Leashes
Item
Variable Cost/Item
Item
Fixed Costs
High-tensile strength nylon webbing
Polyester/nylon ribbons
Buckles made of cast hardware
Price tags
Leash maker’s salary (monthly)
Depreciation on sewing machines
Rent
Utilities and insurance
Scissors, thread, and cording
Loan payment
Salary to self
Total Variable Costs per Leash
Total Fixed Costs
$
–
Harnesses
Item
High-tensile strength nylon webbing
Polyester/nylon ribbons
Buckles made of cast hardware
Price tags
Total Variable Costs per Harness
Variable Cost/Item
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
ACC202 – MANAGERIAL ACCOUNTING
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Milestone Two – Contribution Margin Analysis
COLLARS
LEASHES
Sales Price per Unit
Variable Cost per Unit
Contribution Margin
ACC202 – MANAGERIAL ACCOUNTING
HARNESSES
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Milestone Two – Break-Even Analysis
COLLARS
LEASHES
HARNESSES
Sales Price
$
–
$
–
$
–
Fixed Costs
$
–
$
–
$
–
Contribution Margin
$
–
$
–
$
–
Break-Even Units (round up)
Target Profit
–
$
Break-Even Units (round up)
Target Profit
Break-Even Units (round up)
–
300.00
$
–
$
$
–
500.00
–
400.00
–
$
600.00
–
ACC202 – MANAGERIAL ACCOUNTING
500.00
–
$
650.00
–
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Milestone Three – Statement of Cost of Goods Sold
Beginning Work in Process Inventory
Direct Materials:
Materials: Beginning
Add: Purchases for month of January
$
–
0
Materials available for use
Deduct: Ending materials
Materials Used
Direct Labor
Overhead
Total Costs
Deduct: Ending Work in Process Inventory
0
Cost of Goods Sold
ACC202 – MANAGERIAL ACCOUNTING
Milestone Three – Income Statement
Revenue:
Collars
Leashes
Harnesses
$
–
Total Revenue:
Cost of goods sold
Gross profit
$
$
–
Total Expenses
$
–
Net Income/Loss
$
–
Expenses:
General and administrative salaries
Office supplies
Other business equipment
$
ACC202 – MANAGERIAL ACCOUNTING
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Milestone Three – Variance Analysis
Data for Variance Analysis:
Budgeted
(Standard)
Hours/Qty
Budgeted
(Standard)
Rate
Actual
Hours/Qty
Actual
Rate
Variance
Favorable/
Unfavorable
Labor
Materials
Variances for Collar Sales
Direct Labor Time Variance
(Actual Hours – Standard Hours) x Standard Rate
$
–
Direct Labor Rate Variance
(Actual Rate – Standard Rate) x Actual Hours
$
–
Direct Materials Quantity/Efficiency Variance
(Actual Quantity – Standard Quantity) x Standard Price
$
–
Direct Materials Price Variance
(Actual Price – Standard Price) x Actual Quantity
$
–
ACC202 – MANAGERIAL ACCOUNTING