Directions
Submit a detailed report to your potential investors and other stakeholders to explain and defend your costing strategies and to share your business’s performance to date. Your report will be a Word document (based on the template provided). Be sure to effectively communicate with your stakeholders by breaking down concepts and using investor-friendly language to build their trust and confidence.
Competencies
In this project, you will demonstrate your mastery of the following competencies:
• Describe how managerial accounting supports management information systems
• Utilize managerial accounting techniques and models to support an organization’s
strategic plan
• Explain how managerial accounting is used to make decisions about short-term business
opportunities, capital investments, and evaluating operational performance
Scenario
Your business has been open for a month, and you have prepared an income statement and
completed a variance analysis on the data. Now you will meet with investors and a few other
internal stakeholders to share your company’s progress over the past month and how it has
performed with respect to your cost and budget projections. The investors would like to see the
thought process behind your financial strategy and how your company has performed in its first
month. They have therefore asked you to present a report that includes the costing and income
data from your Project Workbook.
Directions
Submit a detailed report to your potential investors and other stakeholders to explain and defend
your costing strategies and to share your business’s performance to date. Your report will be a
Word document (based on the templates provided). Be sure to effectively communicate with
your stakeholders by breaking down concepts and using investor-friendly language to build their
trust and confidence.
1. Introduction: Provide a short overview of your company and the purpose of this report.
A. Business Overview: Name your company and describe its business and your
vision for its future.
B. Purpose of the Report: Explain the purpose of the report and describe why
the accounting information is important.
C. Methods and Approach: Explain the management accounting methods you
used for generating the information that you are about to share in terms of your
adherence to industry standards and the American Institute of Certified Public
Accountants (AICPA) code of ethics.
2. Financial Strategy: Review your original business plan and costing strategies.
A. Costing System: Justify the use of job order costing for this business. Be sure
to compare and contrast the various costing systems you learned about in this
course as part of your defense.
B. Selling Prices: Share and explain the selling prices you established for each of
your products. Be sure to reference your cost-volume-profit analysis in your
defense.
C. Contribution Margin: Share and explain your contribution margin per unit.
Be sure to reference your cost-volume-profit analysis in your defense.
D. Target Profits: Identify your break-even points for achieving different target
profits. Then explain the target profits you selected for each area of your
business. Be sure to reference your cost-volume-profit analysis in your
defense.
3. Financial Statements: Using the information in the Milestone Two Market Research
Data Appendix, assess your financial performance to date.
A. Statement of Cost of Goods Sold: Share the statement of cost of goods sold
and logically interpret the business’s performance against the provided
benchmarks.
B. Income Statement: Share the income statement and logically interpret the
business’s performance against the provided benchmarks.
C. Variances: Illustrate all variances for the direct labor time and the materials
price.
D. Significance of Variances: Evaluate the significance of the variances in terms
of the potential to impact future budgeting decisions and planning.
[Company Name]
1
[Note: To complete this template, replace the bracketed text with your own content. Remove this
note before you submit your paper.]
Investor Report for [Company Name]
[Your Name]
Southern New Hampshire University
Report for [Company Name]
Introduction
[Outline your company’s business and your vision for its future.]
[Introduce the company and its business. What is your vision for the future of the
business? What do you hope to achieve? Where do you see the company in five years or ten?]
Purpose
[Explain the purpose of the report and what you hope to convey about the company and
its financials.]
[What do you plan to communicate, and why should your investors pay attention? In
other words, try to persuade your investors that the accounting information you are about to
share is important.]
Methods and Approach
[Explain some management accounting methods you used to determine your costing
strategy, evaluate your financial information, etc., and explain how these methods support the
mission and vision of the company.]
[Briefly describe how your report and the data it represents adheres to industry standards
and the AICPA code of ethics. In other words, why should your investors trust that you are
delivering accurate financial data and that your decision-making process has been ethical?]
Financial Strategy
[In this section, review your original business plan and costing strategies. Remove this
note before you submit your paper.]
Report for [Company Name]
Costing System
[Outline why the job order costing system works best for your business. Explain in detail
the use of job order costing for this business. Be sure to compare and contrast the various costing
systems you learned about in this course as part of your defense.]
Selling Prices
[List the selling price you chose for each product.]
[Explain and defend the selling prices you established for each product. Why did you
choose these prices? Be sure to reference your cost-volume-profit analysis in your defense]
Contribution Margin
[Copy and paste your completed table from the “Contribution Margin Analysis” tab of
your Project Workbook.]
[Share and explain your contribution margin per unit. How did you arrive at these
numbers? Be sure to reference your cost-volume-profit analysis in your defense.]
Target Profits
[Copy and paste the completed table from the “Break-Even Analysis” tab of your Project
Workbook.]
[Specify the break-even points you determined for achieving different target profit levels.
Then, explain and defend the target profits you selected for each area of your business. Be sure
to reference your cost-volume-profit analysis in your defense.]
Financial Statements
[This section is designed to have you assess your financial performance to date. Remove
this note before you submit your paper.]
Report for [Company Name]
Statement of Cost of Goods Sold
[Copy and paste your table from the “COGS” tab of your completed Project Workbook.]
[Compare the actual cost of goods sold over the last month and evaluate the company’s
performance against the budgeted benchmarks. Are the numbers close to what you expected?
Interpret the performance and explain what happened.]
Income Statement
[Copy and paste your table from the “Income Statement” tab of your completed Project
Workbook.]
[Based on your income statement, logically interpret the business’s performance against
the provided benchmarks. Did the company do as well as expected? Explain what happened.]
Variances
[Copy and paste your table from the completed “Variances” tab of your Project
Workbook.]
[Illustrate the variances observed between the planned and actual values for the direct
labor time and the direct materials price for collars. What changed?]
Significance of Variances
[Share a summary of your variance analysis. Were the variances favorable or
unfavorable?]
[Evaluate the significance of the variances. Are the variances favorable or unfavorable?
What does it mean? Explain whether and how your evaluation will affect your budgeting and
planning decisions for the next month or quarter.]
Report for [Company Name]
References
[Include any references cited in your paper in full APA format. Don’t forget to include in-text
citations as well.]
H
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
x
Salary – Leash maker
x
x
Salary – Harness maker
x
x
x
Salary – Receptionist
High-tensile strength nylon webbing
x
x
Polyester/nylon ribbons
x
x
Buckles made of cast hardware
x
x
Depreciation on sewing machines
x
x
Rent
x
x
Utilities and insurance
x
x
Scissors, thread, and cording
x
x
Price tags
x
x
Office supplies
x
Other business equipment
x
Loan payment
x
x
Salary to self
x
x
ACC202 – MANAGERIAL ACCOUNTING
H
Milestone One – Variable and Fixed Costs
Workings
Collars
Item
Variable Cost/Item
Item
High-tensile strength nylon webbing
Polyester/nylon ribbons
Buckles made of cast hardware
Price tags
$
$
$
$
4.00
3.00
2.00
0.10
Collar maker’s salary (monthly)
Depreciation on sewing machines
Rent
Utilities and insurance
Scissors, thread, and cording
Loan payment
Salary to self
$
$
$
$
$
$
$
Fixed Costs
2,773.33
55.00
250.00
200.00
400.00
183.33
166.67
Total Variable Costs per Collar
$
9.10
Total Fixed Costs
$
4,028.33
Variable cost
high tensile strength nylon webbing cost: $12/3 = $4 per collar
Ribbon cost: $9/3 = $3 per collar
2773.333
55
250
200
400
183.3333
166.6667
Buckle cost: $0.50 * 4 = $2 per collar
Price tags 0.10 each
Total variable cost per collar = $4 (webbing) + $3 (ribbon) + $2 (buckle)+ 0.1 (price tag) = $9.10 per collar
2773.333
-55
250
200
400
183.3333
166.6667
Variable cost
high tensile strength nylon webbing cost: $12/2 = $6 per collar
Leashes
Item
Variable Cost/Item
Item
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
$
$
$
$
$
$
$
2,773.33
55.00
250.00
200.00
400.00
183.33
166.67
Total Fixed Costs
$
4,028.33
Total Variable Costs per Leash
$
6.00
4.50
1.50
0.10
12.10
Fixed Costs
Ribbon cost: $9/2 = $4.5 per collar
Buckle cost: $0.50 * 3 = $1.5 per collar
Price tags 0.10 each
Total variable cost per collar = $6 (webbing) + $4.5(ribbon) + $1.5 (buckle) + 0.1 (price tag)= $12.1per collar
$4,028.33
Harnesses
Item
Variable Cost/Item
Item
High-tensile strength nylon webbing
Polyester/nylon ribbons
Buckles made of cast hardware
Price tags
$
$
$
$
6.00
4.50
4.00
0.10
Harness maker’s salary
Depreciation on sewing machines
Rent
Utilities and insurance
Scissors, thread, and cording
Loan
Salary to self
$
$
$
$
$
$
$
Fixed Costs
2,946.68
55.00
250.00
200.00
400.00
183.33
166.67
Total Variable Costs per Harness $
14.60
Total Fixed Costs
$
4,201.68
2946.667
55
250
200
400
183.3333
166.6667
ACC202 – MANAGERIAL ACCOUNTING
high tensile strength nylon Webbing cost: $12/2 = $6 per harness
Ribbon cost: $9/2 = $4.50 per harness
Buckle cost: $0.50 * 8 = $4 per harness
Price tag each at 0.10
Total variable cost per harness = $6 (webbing) + $4.50 (ribbon) + $4 (buckle) + price tag 0.1 = $14.60 per harness
H
Milestone Two – Contribution Margin Analysis
COLLARS
LEASHES
HARNESSES
Sales Price per Unit
Variable Cost per Unit
$
$
24.00
9.10
$
$
26.00
12.10
$
$
30.00
14.60
Contribution Margin
$
14.90
$
13.90
$
15.40
ACC202 – MANAGERIAL ACCOUNTING
H
Milestone Two – Break-Even Analysis
COLLARS
Sales Price
$
Fixed Costs
Contribution Margin
$
Break-Even Units (round up)
14.90
$
300.00
$
500.00
304.00
$
13.90
$
302
$
290.00
$
HARNESSES
26.00
4,201.68
270
Break-Even Units (round up)
Target Profit
LEASHES
$
4,028.33
Break-Even Units (round up)
Target Profit
24.00
400.00
Fixed Costs / (Sales Price Per Unit – Variable Cost Per Unit)
Break Even Units =
Fixed Costs / (Contribution Margin Per Unit)
4,201.68
Collars =
Collars =
$4028.33/14.90
270
Leashes=
Leashes=
$4201.68/13.90
302
Harnesses=
Harnesses=
$4201.68/15.40
273
15.40
273
$
331.00
$
Break Even Units =
30.00
500.00
305.00
600.00
$
650.00
345.00
$
315.00
Collars
Collars =
Generate $300
Collars =
Collars =
Break Even Units =
Generate $500
Collars =
Collars =
Break Even Units =
ACC202 – MANAGERIAL ACCOUNTING
Target Profit of $300
270 Break Even
300/14.90
20
290.00
500/14.90
34
304.00
Generate $400
Leashes=
Leashes=
Break Even Units =
400/13.90
29
331.00
Generate $600
Leashes=
Leashes=
Break Even Units =
600/13.90
43
345.00
Generate $500
Harnesses=
Harnesses=
Break Even Units =
500/15.40
32
305.00
Generate $650
Harnesses=
Harnesses=
Break Even Units =
650/15.40
42
315.00
H
Milestone Three – Statement of Cost of Goods Sold
Beginning Work in Process Inventory
Direct Materials:
Materials: Beginning
Add: Purchases for month of January
Materials available for use
Deduct: Ending materials
$
$
20,000
20,000
4,000
Materials Used
Direct Labor
Overhead
Total Costs
16,000
8,493
3,765
$
Deduct: Ending Work in Process Inventory
Cost of Goods Sold
–
28,258
0
$
ACC202 – MANAGERIAL ACCOUNTING
28,258
Milestone Three – Income Statement
Revenue:
Collars
Leashes
Harnesses
$
12,000
11,960
13,200
Total Revenue:
Cost of goods sold
Gross profit
$
$
37,160
28,258
8,902
Total Expenses
$
2,300.00
Net Income/Loss
$
6,602.00
Expenses:
General and administrative salaries
Office supplies
Other business equipment
$
ACC202 – MANAGERIAL ACCOUNTING
1,950
200
150
Milestone Three – Variance Analysis
Data for Variance Analysis:
Budgeted
(Standard)
Hours/Qty
Budgeted
(Standard)
Rate
Actual
Hours/Qty
Actual
Rate
Labor
160
$
16.00
180
$
16.50
Materials
560
$
9.10
620
$
10.00
Variances for Collar Sales
Variance
Favorable/
Unfavorable
Direct Labor Time Variance
(Actual Hours – Standard Hours) x Standard Rate
$
320.00
Unfavorable
Direct Labor Rate Variance
(Actual Rate – Standard Rate) x Actual Hours
$
90.00
Unfavorable
Direct Materials Quantity/Efficiency Variance
(Actual Quantity – Standard Quantity) x Standard Price
$
546.00
Unfavorable
Direct Materials Price Variance
(Actual Price – Standard Price) x Actual Quantity
$
504.00
Unfavorable
ACC202 – MANAGERIAL ACCOUNTING
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