# ACC 202 SNHU Cogs Income Statements and Variance Project

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ACC 202 Milestone Three: Actual Costs and Revenue Data Appendix
At the end of the first month of opening your business, you calculate the actual operating costs of the
business and the income you earned. You also notice and document the difference in what you
budgeted for certain materials and labor against the actual amounts you spent on the same.
For your statement of cost of goods sold, use the following data regarding the actual costs incurred by
the business over the past month:

Materials purchased: \$20,000
o Consumed 80% of the purchased materials
• Direct labor: \$8,493
Note: Assume that the beginning materials and ending work in process are zero for the month.
Use the following revenue and cost information for the income statement. Note that the revenue you
use will depend on the pricing level options you chose in Milestone Two. Also, assume that after
accounting for weekends and other holidays, there were 20 business days in the first month of
operation. For example, if you chose a sales price of \$20 per collar, the actual number of collars sold in
the month was 33 per day or 33 x 20 = 660 per month.
Established Sales Price
Collars
\$20
\$24
\$28
Leashes
\$22
\$26
\$30
Harnesses
\$25
\$30
\$35
Number of Items Sold per Day
33
28
23
28
23
18
25
22
20
The other costs incurred by the business include:

o Receptionist: \$1,950
Office supplies: \$200
1
Variance
At the end of the month, you find that the labor and materials spent on manufacturing collars was
different from what you estimated:

The collar maker had to work nine hours a day instead of eight due to an increased demand for
collars.
Because of the increased demand, the hourly rate you paid your employee for making the
collars increased to \$16.50.
An increase in the cost of raw material led the direct material cost per collar to increase to \$10.
However, you also made and sold 60 more collars than you expected to sell in the month.
You now need to determine the variance in the materials and labor cost from what you estimated in
Milestone Two based on the market research data.
2
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
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
x
x
Depreciation on sewing machines
x
x
Rent
x
x
Utilities and insurance
x
x
x
x
Price tags
X
x
Office supplies
X
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
Price tags
\$
\$
\$
\$
4.00
3.00
2.00
0.10
Collar maker’s salary (monthly)
Depreciation on sewing machines
Rent
Utilities and insurance
Loan payment
Salary to self
\$
\$
\$
\$
\$
\$
\$
Fixed Costs
2,773.33
55.00
250.00
200.00
400.00
183.33
166.67
[(\$16 per hour*40 hour per week)*52 weeks per year)/12months
\$3300/60 months (5 years)
\$750 per month*(500/1500)=\$250
\$600 per month*(500/1500)=\$200
\$1200/3 products
\$550*(500/1500 sq ft
\$500 per month allocated to 3 services
Total Variable Costs per Collar
\$
9.10
Total Fixed Costs
\$
4,028.33
\$4,028.33
Leashes
Item
Variable Cost/Item
Item
High-tensile strength nylon webbing
Polyester/nylon ribbons
Price tags
\$
\$
\$
\$
6.00
4.50
1.50
0.10
Leash maker’s salary (monthly)
Depreciation on sewing machines
Rent
Utilities and insurance
Loan payment
Salary to self
\$
\$
\$
\$
\$
\$
\$
Fixed Costs
2,773.33
55.00
250.00
200.00
400.00
183.33
166.67
[(\$16 per hour*40 hour per week)*52 weeks per year)/12month
\$3300/60 months (5 years)
\$750 per month*(500/1500)=\$250
\$600 per month*(500/1500)=\$200
\$1200/3 products
\$550*(500/1500 sq ft
\$500 per month allocated to 3 services
Total Variable Costs per Leash
\$
12.10
Total Fixed Costs
\$
4,028.33
\$4,028.33
Harnesses
Item
Variable Cost/Item
Item
High-tensile strength nylon webbing
Polyester/nylon ribbons
Price tags
\$
\$
\$
\$
Harness maker’s salary
Depreciation on sewing machines
Rent
Utilities and insurance
Loan
Salary to self
\$
\$
\$
\$
\$
\$
\$
2,946.67
55.00
250.00
200.00
400.00
183.33
166.67
[(\$17 per hour*40 hour per week)*52 weeks per year)/12month
\$3300/60 months (5 years)
\$750 per month*(500/1500)=\$250
\$600 per month*(500/1500)=\$200
Total Fixed Costs
\$
4,201.67
\$4,201.67
Total Variable Costs per Harness \$
6.00
4.50
4.00
0.10
14.60
Fixed Costs
\$550*(500/1500 sq ft
\$500 per month allocated to 3 services
ACC202 – MANAGERIAL ACCOUNTING
H
Milestone Two – Contribution Margin Analysis
COLLARS
Sales Price per Unit
\$
Variable Cost per Unit
Contribution Margin
20.00
LEASHES
\$
9.10
\$
10.90
22.00
HARNESSES
\$
12.10
\$
9.90
25.00
14.60
\$
10.40
ACC202 – MANAGERIAL ACCOUNTING
Sales prices – Variable cost = Contrubution Margin
Sales prices – Variable cost = Contrubution Margin
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
\$
Break-Even Point = Fixed Cost / Contribution Margin
Target profits is Sales Needed = ( fixed cost + Target Profit ) / Contribution Margin
Break-Even Units (round up)
Target Profit
370
\$
Break-Even Units (round up)
Target Profit
Break-Even Units (round up)
300.00
407.00
\$
397
\$
500.00
415
400.00
\$
447
\$
600.00
468
10.40
404.00
500.00
452
\$
650.00
467
ACC202 – MANAGERIAL ACCOUNTING
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
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
Number of collars sold per day33 X 20 days= collars sold per month = 660 x Price of collar \$ 20 = Revenue \$13200
Number of collars sold per day 28 X 20 days= collars sold per month = 560 x Price of collar \$ 20 = Revenue \$12320
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:
Office supplies
\$
\$
1,950
200
150
ACC202 – MANAGERIAL ACCOUNTING
Milestone Three – Variance Analysis
Data for Variance Analysis:
Budgeted
(Standard)
Hours/Qty
Budgeted
(Standard)
Rate
Actual
Hours/Qty
Actual
Rate
Variance
Favorable/
Unfavorable
Labor
Materials
Variances for Collar Sales
Direct Labor Time Variance
(Actual Hours – Standard Hours) x Standard Rate
\$

Direct Labor Rate Variance
(Actual Rate – Standard Rate) x Actual Hours
\$

Direct Materials Quantity/Efficiency Variance
(Actual Quantity – Standard Quantity) x Standard Price
\$

Direct Materials Price Variance
(Actual Price – Standard Price) x Actual Quantity
\$

ACC202 – MANAGERIAL ACCOUNTING

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Cost Classification

Revenue Data Appendix

income statement

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