Nina is considering producing earrings that she will mostly sell online. She will require specific materials for
Question:
Nina is considering producing earrings that she will mostly sell online. She will require specific materials for this product line. She hopes to start selling this line in January and has provided you with her expectations of sales in units (one pair of earrings). January 1200, February 1500, March 1600, April 1750. She needs 20 grams of silver and two pieces of sea glass for each set of earrings. Silver is priced at 81 cents per gram and sea glass is sourced at $5 per piece. She thinks it would be a good idea to have half of the finished goods ready at the end of one month for the next month’s sales. All materials are available without lag times. The earrings will incur a labor cost of $75 each and sell for $125 each. She doesn’t predict any other significant costs at this stage.
a. Nina would like you to demonstrate how to budget for sales, labor, production (in units), and materials (in dollars). Prepare a production and materials budget for the silver earrings in Excel for the first three months of the year.
b. From the budgets produced above advise Nina on whether she should commit to the new earrings production.