ome 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 month

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Milestone 1-

I wanted to see if anyone could verify my numbers as correct, or point me in the right direction if I have made an error.

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

· 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 (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

Milestone One - Variable and Fixed Costs
Collars
Item
Variable Cost/item
Item
Aed Costs
High-tensile strength nylon webbing s
Pol yester/nylon ribbons
Buckkes made of cat hardware
4.00
2,773.33
Collar maker's salanry (monthiy)
Depreciation on sewing machines
3.00
55.00
2.00
Rent
250.00
Price tag
0.10
utiities and insurance
200.00
Scissors, thread, and cording
400.00
Lo an payment
183.33
Salary to seif
166.67
Total Variable costs per collar
9.10
Total Fined Costs
4,028.33
Lashes
Item
Varisble Cost/item
Item
Fxed Costs
High-tensile stren gth nylon webb ing
Polyester/nylon ribbons
Buckes made of cast hardware
Leash maker's salary (mo nth ly)
Depreciation on sewing machines
6.00
2,773.33
450
55.00
1.50
Rent
250.00
Price tag
0.10
Utities and insurance
200.00
scssors, thread, and cording
400.00
Lo an payment
183.33
Salary to seif
166.67
Total Variable Costs per Leash
12.10
Total Fixed Costs
4,028.33
Hamesses
Item
Variable Cost/Item
Fixed Costs
Item
High-tensile stren gh nylon webbing
Polyester/nylon ribbons
Buckles made of cant hardware
Harness maker's salary
Depreciation on wwing machines
Rent
Utlities and insurance
6.00
2,946.67
450
55.00
4.00
250.00
Price tag
0.10
200.00
scssors, thread, and cording
400.00
LOan
183.35
Saary to seif
166.67
Total Variable costs per Harness 3
14.60
Total Fixed Costs
4,201.47
Acc MANAGERAL ACCOUNTING
Transcribed Image Text:Milestone One - Variable and Fixed Costs Collars Item Variable Cost/item Item Aed Costs High-tensile strength nylon webbing s Pol yester/nylon ribbons Buckkes made of cat hardware 4.00 2,773.33 Collar maker's salanry (monthiy) Depreciation on sewing machines 3.00 55.00 2.00 Rent 250.00 Price tag 0.10 utiities and insurance 200.00 Scissors, thread, and cording 400.00 Lo an payment 183.33 Salary to seif 166.67 Total Variable costs per collar 9.10 Total Fined Costs 4,028.33 Lashes Item Varisble Cost/item Item Fxed Costs High-tensile stren gth nylon webb ing Polyester/nylon ribbons Buckes made of cast hardware Leash maker's salary (mo nth ly) Depreciation on sewing machines 6.00 2,773.33 450 55.00 1.50 Rent 250.00 Price tag 0.10 Utities and insurance 200.00 scssors, thread, and cording 400.00 Lo an payment 183.33 Salary to seif 166.67 Total Variable Costs per Leash 12.10 Total Fixed Costs 4,028.33 Hamesses Item Variable Cost/Item Fixed Costs Item High-tensile stren gh nylon webbing Polyester/nylon ribbons Buckles made of cant hardware Harness maker's salary Depreciation on wwing machines Rent Utlities and insurance 6.00 2,946.67 450 55.00 4.00 250.00 Price tag 0.10 200.00 scssors, thread, and cording 400.00 LOan 183.35 Saary to seif 166.67 Total Variable costs per Harness 3 14.60 Total Fixed Costs 4,201.47 Acc MANAGERAL ACCOUNTING
Milestone Two - Contribution Margin Analysis
COLLARS
LEASHES
HARNESSES
35.00
Sales Price per Unit
Variable Cost per Unit
24.00
22.00
9.10
12.10
14.60
Contribution Margin
14.90
9.90
20.40
Transcribed Image Text:Milestone Two - Contribution Margin Analysis COLLARS LEASHES HARNESSES 35.00 Sales Price per Unit Variable Cost per Unit 24.00 22.00 9.10 12.10 14.60 Contribution Margin 14.90 9.90 20.40
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Here's the second part of the milestone if you could verify these numbers to being accurate?

Milestone Two - Break-Even Analysis
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)
$
$
$
$
$
COLLARS
24.00
4,028
14.90
370.00
300.00
397.00
500.00
415.00
$
$
$
$
$
LEASHES
22.00
4,029
13.90
407.00
400.00
447.00
600.00
468.00
$
$
$
$
$
HARNESSES
35.00
4,201
15.40
404.00
500.00
452.00
650.00
466.00
Transcribed Image Text:Milestone Two - Break-Even Analysis 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) $ $ $ $ $ COLLARS 24.00 4,028 14.90 370.00 300.00 397.00 500.00 415.00 $ $ $ $ $ LEASHES 22.00 4,029 13.90 407.00 400.00 447.00 600.00 468.00 $ $ $ $ $ HARNESSES 35.00 4,201 15.40 404.00 500.00 452.00 650.00 466.00
Milestone Two - Contribution Margin Analysis
COLLARS
Sales Price per Unit
Variable Cost per Unit
Contribution Margin
$
$
24.00
9.10
14.90
$
$
LEASHES
22.00
12.10
13.90
$
$
HARNESSES
35.00
14.60
15.40
Transcribed Image Text:Milestone Two - Contribution Margin Analysis COLLARS Sales Price per Unit Variable Cost per Unit Contribution Margin $ $ 24.00 9.10 14.90 $ $ LEASHES 22.00 12.10 13.90 $ $ HARNESSES 35.00 14.60 15.40
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