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.

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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

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

/xl/drawings/drawing2.xml#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

/xl/drawings/drawing3.xml#Home

Variable and Fixed Costs

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