Assume the role of the owner of a small business and apply managerial accounting principles to evaluate and manage costs related to your services within a costing system. I
Overview
Successful entrepreneurs understand all aspects of business, especially costs and costing systems. In the course project, you will assume the role of the owner of a small business and apply managerial accounting principles to evaluate and manage costs related to your services within a costing system. In the first milestone of the project, you will determine and classify the costs necessary for opening your business.
Scenario
You plan to open a business manufacturing collars, leashes, and harnesses for pets. To begin, you will manufacture these in a standard style and size with plans to expand your range over the year. In a few weeks, you will present your company’s financial strategy to some key investors. To begin creating your strategy, you need to consider and record all the costs associated with operating your business. You have decided to use the job order costing system.
Prompt
Use the given operational costs in the Milestone One Operational Costs Data Appendix Word Document (attachment included) to complete the first two tabs, “Cost Classification” and “Variable and Fixed Costs,” in the Project Workbook Spreadsheet. (Attachment Included)
Specifically, you must address the following rubric criteria:
- Cost Classification. Accurately classify all your costs in the “Cost Classification” tab of your workbook.
- Identify direct material, direct labor, overhead, and period costs. (Note: Fixed and variable costs have been classified for you.)
- Variable and Fixed Costs. Complete the “Variable and Fixed Costs” tab of your workbook. (Note: Some costs are provided for you. Fill in only the missing costs.)
- Determine your total variable cost per unit and the total fixed costs for each product. Show your work using calculations to the side of the table or using appropriate formulas in the table.
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
Polyester/nylon ribbons—$9 per yard of ribbon
3 collars per yard of ribbon
2 leashes per yard of ribbon
2 harnesses per yard of ribbon
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, 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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Instructions
| Southern New Hampshire University | |||||||||||
| College of Continuing Education (COCE) | |||||||||||
| ACC202 – Managerial Accounting | |||||||||||
| MILESTONE 1 (Due in Module 2) | MILESTONE 2 (Due in Module 4) | MILESTONE 3 (Due in Module 5) | |||||||||
| 1. | 1. | 1. | |||||||||
| Name | Choose a price range and calculate: | Create a Cost of Goods Manufactured Schedule | |||||||||
| Location | Grooming | ||||||||||
| Vision | Day Care | ||||||||||
| Mission | Boarding | ||||||||||
| 2. | 2. | 2. | |||||||||
| Identify the following: | Calculate the break-even units | Create an Income Statement | |||||||||
| Direct Materials | Grooming | Revenue will be provided end of week 4 | |||||||||
| Diret Labor | Day Care | ||||||||||
| Manufacturing Overhead | Boarding | ||||||||||
| Period Costs | Calculate the break-even for target profits | ||||||||||
| 3. | Grooming | 3. | |||||||||
| Day Care | |||||||||||
| Calculate the Variable & Fixed Costs for: | Boarding | Calculate for the Grooming line: | |||||||||
| Grooming | Direct Labor Time Variance | ||||||||||
| Day Care | Direct Labor Rate Variance | ||||||||||
| Boarding | Direct Materials Efficiency Variance | ||||||||||
| Direct Materials Price Variance |
ACC202 – MANAGERIAL ACCOUNTING
Company Profile
/xl/drawings/drawing1.xml#CompanyProfile
Variable & Fixed Costs
/xl/drawings/drawing1.xml#VariableFixedCosts
Cost Classification
/xl/drawings/drawing1.xml#CostClassification
Contribution Margin
/xl/drawings/drawing1.xml#ContributionMargin
Break-Even Analysis
/xl/drawings/drawing1.xml#BreakevenAnalysis
COGM Schedule
/xl/drawings/drawing1.xml#COGMSchedule
Income Statement
/xl/drawings/drawing1.xml#COGMSchedule
Variances
/xl/drawings/drawing1.xml#Variances
Instructions Milestone 1
/xl/drawings/drawing1.xml#InstructionsMilestone1
Instructions Milestone 2
/xl/drawings/drawing1.xml#'Instructions%20-%20Milestone%202'!InstructionsMilestone2
Instructions Milestone 3
/xl/drawings/drawing1.xml#'Instructions%20-%20Milestone%203'!InstructionsMilestone3
Instructions – Milestone 1
| Southern New Hampshire University | ||||
| College of Continuing Education (COCE) | ||||
| ACC202 – Managerial Accounting | ||||
| INSTRUCTIONS FOR MILESTONE 1 (Due Week 2) | ||||
| IMPORTANT NOTE: | ||||
| Make sure to completely review the Rubric for Milestone 1 | ||||
| Use the data from this Milestone and begin working on your final presentation due in Milestone 4 (Week 7) | ||||
| ITEMS TO COMPLETE FOR THIS MILESTONE (Blue Tabs): | ||||
| GENERAL | ||||
| You plan to open a pet services business that will offer dog grooming, day care and boarding | ||||
| COST CLASSIFICATION | ||||
| Accurately classify all of your costs (direct material, direct labor, manufacturing overhead, period costs) | ||||
| Fixed & Variable cost designation is provided | ||||
| VARIABLE & FIXED COSTS | ||||
| Determine your per unit cost per dog for grooming, day care and boarding | ||||
| OPERATIONAL & COST INFORMATION: | ||||
| For simplicity, base all calculations using 30 days in each month | ||||
| OPERATIONAL DATA | ||||
| Grooming: | ||||
| The Groomer can groom 5 dogs a day, 5 days a week | ||||
| Each grooming takes 1.5 labor hours | ||||
| Day Care: | ||||
| The Day Care can house 10 large dogs and 12 small dogs daily. | ||||
| Day Care is offered 6 days a week | ||||
| Boarding: | ||||
| There are 12 kennels (single dog only). | ||||
| Boarding (kennel services) is offered every day | ||||
| Facilities: | ||||
| The Grooming facility is 200 square feet | ||||
| The Boarding facility is 2,500 square feet | ||||
| The Day Care facility is 1,500 square feet | ||||
| General: | ||||
| Loan for start-up costs – monthly payment of $420; in effect immediately; limited cash and loan funding – used angel investors | ||||
| Modest monthly draw of $600 a month for first year; should be divided evenly amoung the services (grooming, day care, boarding) | ||||
| SALARY & HIRING DATA | ||||
| Groomer (Allison) – $12.00 an hour, 40 hours a week | ||||
| Day Care Attendant (Beverly) – $9.00 per hour, based on need | ||||
| Receptionist (Cathie) – $8.50 per hour, 30 hours a week | ||||
| Kennel Attendant (Ben) – $11.50 per hour, based on need | ||||
| OTHER COST DATA | ||||
| Grooming: | ||||
| Dog Grooming Arm – $300 | . | |||
| Grooming Table – $900 | ||||
| Grooming Tub – $2,800 | ||||
| Clippers – $136.99; can be used for 100 grooms | ||||
| Shampoo – $103.96 per 5-gallon pail; can be used for 100 grooms | ||||
| Salon Tuff Capri Mobile Carry Cart – $90 | ||||
| Scissors (7 inch straight) – $194.99; used for 200 grooms | ||||
| Scissors (ear and nose) – $7.49; used for 200 grooms | ||||
| Day Care: | ||||
| Fencing for Day Care area – $1,249 | ||||
| Fencing Installation – $1,000 | ||||
| Toys – $3.29 per 6 pack; one toy will last for two dogs in day care per day | ||||
| Rubberized Flooring for Day Care – $3,800 | ||||
| Boarding: | ||||
| 12 Kennels; Depreciation is $80 per month | ||||
| General: | ||||
| Food & Water bowls – $3.59 per unit | ||||
| Day Care – two bowls last for every 75 dogs that attend daycare | ||||
| Boarding – two bowls last for every 100 dogs boarded; two bowls per kennel | ||||
| Grooming – each bowl lasts for 20 grooms and you need 4 bowls at all times | ||||
| Towels – $34.99 per 12 pack | ||||
| Day Care – 12 towels for every 25 dogs | ||||
| Boarding – 12 towels for every 40 dogs | ||||
| Grooming – 2 towels for every groom per day | ||||
| Heating System – $10,000; Depreciation is $83 per month; Allocate based on square footage | ||||
| Rent – $650 per month; Allocate based on square footage | ||||
| Utilities / Insurance – $600 per month; Allocate based on square footage | ||||
| Cage Bank – $2,200 per set of 5 | ||||
| Dryer – $1,250 | ||||
| Cleaning Products | ||||
| Odoban – $14.55 per gallon; Each area wil dilute 1 oz to 1 gallon of water; Allocate based on square footage | ||||
| Simple Green – $15.66 per gallon; Each area will dilute 1 oz to 1 gallon of water; Allocate based on square footage | ||||
| . |
ACC202 – MANAGERIAL ACCOUNTING
HOME
Cost Classification
| 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 | |||||
| Price tags | x | |||||
| Office supplies | ||||||
| Other business equipment | ||||||
| Loan payment | x | |||||
| Salary to self | x | |||||
&8ACC202 – MANAGERIAL ACCOUNTING
HOME
Variable and Fixed Costs
| Milestone One – Variable and Fixed Costs | ||||
| Collars | ||||
| Item | Variable Cost/Item | Item | Fixed Costs | |
| High-tensile strength nylon webbing | $ 4.00 |
