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. You plan to open a small business for manufacturing pet
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
INSTRUCTIONS:
Putting an X in the appropriate spot, classify the costs as: Direct Material, Direct Labor, Overhead, or Period Costs.
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