STEP #1 • Write a description of your product with at least three material components. This product should be either an original product or a substantial modification to an existing product.

STEP #2 • Develop the standard cost for one unit of your product. Include the bill of materials (material prices can be found online). • Develop an Operations Flow Document detailing the departments that this product will pass through during the manufacturing process. This can be done either as a written description or using a flowchart. Indicate if you are using a job order, process or hybrid costing system. Estimate the amount of time each unit will remain in each department or process. The labor rate should be $12.00 per hour. • Develop a realistic Overhead Budget for your company. Set a monthly factory rent expense; between $5,000 - $10,000 per month. Your overhead amounts should be detailed out by expense type. • Estimate the number of units that you expect to produce and calculate the predetermined overhead rate for use in the standard cost.

STEP #3 • Set a realistic selling price for your product; either use target costing or a mark-up approach. Compare prices of similar products on the market. Explain the process you went through in determining your price and provide the comparative prices. Develop a pro-forma income statement • You will set the demand for your product. 

• You can borrow up to $1,000,000 to finance your company and be sure to set the interest rate. 

• Include your salary and other Selling & Administrative expenses (ex. Marketing). 

• Write a summary of the feasibility of your product based upon the pro-forma income statement and discuss what hurdles you may encounter in order to enter the market. It’s possible you may have a loss in the first few years, so what changes can be implemented in order to have a profit?

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