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 can be in the form of a PowerPoint presentation. Be sure to effectively communicate with your stakeholders by breaking down concepts and using investor-friendly language to build their trust and confidence. If you choose to do a PowerPoint presentation, you’ll need to include speaker notes for each slide.
Introduction: Provide a short overview of your company and the purpose of this report.
Business Overview: Name your company and describe its business and your vision for its future.
Purpose of the Report: Explain the purpose of the report and describe why the accounting information is important.
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.
Financial Strategy: Review your original business plan and costing strategies.
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.
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.
Contribution Margin: Share and explain your contribution margin per unit. Be sure to reference your cost-volume-profit analysis in your defense.
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.
Financial Statements: Using the information in the Milestone Two Market Research Data Appendix, assess your financial performance to date.
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.
Income Statement: Share the income statement and logically interpret the business’s performance against the provided benchmarks.
Variances: Illustrate all variances for the direct labor time and the materials price.
Significance of Variances: Evaluate the significance of the variances in terms of the potential to impact future budgeting decisions and planning.
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
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
Leashes
Item
Variable Cost/Item
Item
High-tensile strength nylon webbing
Polyester/nylon ribbons
Buckles made of cast hardware
Price tags
$
$
$
$
6.00
4.50
1.50
0.10
Leash 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 Leash
$
12.10
Total Fixed Costs
$
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
2,946.67
55.00
250.00
200.00
400.00
183.33
166.67
Total Variable Costs per Harness $
14.60
Total Fixed Costs
$
4,201.67
ACC202 – MANAGERIAL ACCOUNTING
H
Milestone Two – Contribution Margin Analysis
COLLARS
LEASHES
HARNESSES
Sales Price per Unit
Variable Cost per Unit
$
20.00
9.10
$
22.00
12.10
$
25.00
14.60
Contribution Margin
$
10.90
$
9.90
$
10.40
ACC202 – MANAGERIAL ACCOUNTING
H
Milestone Two – Break-Even Analysis
COLLARS
LEASHES
HARNESSES
Sales Price
$
20.00
$
22.00
$
25.00
Fixed Costs
$
4,028
$
4,028
$
4,202
Contribution Margin
$
10.90
$
9.90
$
10.40
Break-Even Units (round up)
Target Profit
370
$
Break-Even Units (round up)
Target Profit
Break-Even Units (round up)
300.00
407
$
398
$
500.00
416.00
400.00
405
$
448
$
600.00
468
ACC202 – MANAGERIAL ACCOUNTING
500.00
453
$
650.00
467
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
$
$
0
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
$
13,200
12,320
12,500
Total Revenue:
Cost of goods sold
Gross profit
$
$
38,020
(28,258)
9,762
Total Expenses
$
2,300.00
Net Income/Loss
$
7,462.00
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
660
$
9.10
720
$
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
$
648.00
Unfavorable
ACC202 – MANAGERIAL ACCOUNTING
[Insert Company Name]
Investor Report
Prepared by [Your Name]
Introduction
• [Outline your company’s business and your vision for its future.]
2
Purpose
[Explain the purpose of this report and what you hope to convey
about the company and its financials.]
3
Methods and Approach
• [Explain some management accounting methods and how your
report and the data it represents adheres to industry standards and
the AICPA code of ethics.]
4
Financial Strategy
5
Costing System
• [Outline why the job order costing system works best for the
business.]
6
Selling Prices
• [List the selling price you chose for each product.]
7
Contribution Margin
• [Copy and paste your completed table from the “Contribution
Margin Analysis” tab of your Project Workbook.]
8
Target Profits
[Copy and paste the completed table from the “Break-Even Analysis”
tab of your Project Workbook.]
9
Financial Statements
10
Statement of Cost of Goods Sold
[Copy and paste your table from the “COGS” tab of your completed
Project Workbook.]
11
Income Statement
[Copy and paste your table from the “Income Statement” tab of your
completed Project Workbook.]
12
Variances
[Copy and paste your table from the completed “Variances” tab of
your Project Workbook.]
13
Significance of Variances
[Share a summary of your variance analysis. Were the variances
favorable or unfavorable?]
14
References
[Include any references cited in your paper in full APA format. Don’t
forget to include in-text citations as well.]
15
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Formatting
Title Page
Citation
Outline
