You plan to open a small business for manufacturing pet collars, leashes, and harnesses. You have found a workshop space you can use for sewing your products. After some research and planning, you have estimates for the various operating costs for your business.

The total square footage for the sewing rooms is 1,500 square feet broken into three areas (500 square feet each). You have taken out a loan for start-up costs, and the monthly payment is $550; it goes into effect immediately and should be accounted for in your costs. You will also collect a modest salary for the first year of $500 per month; remember to divide evenly among the services.

Salary and Hiring Data

• One collar maker, who will be paid $16.00 per hour and work 40 hours per week
• One leash maker, who will be paid $16.00 per hour and work 40 hours per week
• One harness maker, who will be paid $17.00 per hour and work 40 hours per week
• One receptionist, who will be paid $15.00 per hour and work 30 hours per week

Other Costs

• Rent: $750 per month; allocate based on square footage
• High-tensile strength nylon webbing—$12 per yard of webbing
  • 3 collars per yard of webbing
  • 2 leashes per yard of webbing
  • 2 harnesses per yard of webbing
• Polyester/nylon ribbons—$9 per yard of ribbon
  • 3 collars per yard of webbing
  • 2 leashes per yard of webbing
  • 2 harnesses per yard of webbing
• Buckles made of cast hardware—$0.50 per buckle
  • 4 buckles used per collar
  • 3 buckles used per leash
  • 8 buckles used per harness
• 3 industrial sewing machines at $3,300 each for a total of $9,900; depreciation is $165 per month (5-year life)
• Utilities and insurance: $600 per month; allocate based on square footage
• Scissors, thread, cording: $1,200
• Price tags: $250 for 2,500 ($0.10 each)
• Office supplies: $2,400 or $200 per month
• Other business equipment: $2,000
• Loan payment of $550 per month
• Salary drawn of $500 per month

Transcribed Image Text:

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. Direct Direct Item/Cost Material Labor Overhead Period Costs Fixed Variable Salary - Collar maker Salary - Leash maker Salary - Harness maker Salary - Receptionist High-tensile strength nylon webbing Polyester/nylon ribbons Buckles made of cast hardware Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Price tags Office supplies Other business equipment Loan payment Salary to self X: X: X X: x x 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. Direct Direct Item/Cost Material Labor Overhead Period Costs Fixed Variable Salary - Collar maker Salary - Leash maker Salary - Harness maker Salary - Receptionist High-tensile strength nylon webbing Polyester/nylon ribbons Buckles made of cast hardware Depreciation on sewing machines Rent Utilities and insurance Scissors, thread, and cording Price tags Office supplies Other business equipment Loan payment Salary to self X: X: X X: x x

Answer rating: 100% (QA)

Sheet Showing calculation of variable cost item and Total fixed cost of all the differ... View the full answer