Assume you are going to become an entrepreneur and start your own business. Think about your talents and interests and come up with an idea for a small business venture that provides a unique product or service to local customers. You can select any business venture you want, but if you are struggling to come up with an idea, here are some examples:
Video Production Company
Pool building company
Personal shopping service
Interior design business
Rock-climbing guide service
Web Design Company
For whatever business venture you select, answer the following questions:
1. What would the major costs of your business be? Try to classify the costs into the areas of direct materials; direct labor; manufacturing overhead; and selling, general, and administrative expenses.
2. Why would you need to determine the cost of providing your product or service to individual customers? In other words, what types of decisions would you expect to make based on job order cost information?
3. In general, would you expect your company’s indirect (overhead) costs to be less or more than the direct costs (direct labor and materials)? What allocation base do you think you would use to charge overhead costs to individual customers? How much do you think the overhead rate would need to be?
4. Provide the job cost sheet format for a company?