Choose an item that you would like to manufacture. You do not actually need to m

Question

Choose an item that you would like to manufacture. You do not actually need to manufacture something, but will proceed through the assignment as if you were planning on manufacturing the item you have selected. The product should require materials and labor and be something that you are familiar with in process from start to finish. The product must be useful and marketable. You can choose something as simple as making chocolate chip cookies, a type of craft, or something more complicated. Consider production as if you were making the product from beginning to end, and not as if using a kit. Perform the following steps: Choose a product to manufacture and describe the manufacturing process. Prepare the following budgets for 1 quarter, broken down monthly, regarding your chosen item: estimated sales budget estimated direct materials budget estimated direct labors budget estimated manufacturing overhead budget estimated selling and administrative expenses estimated income statement. Classify all manufacturing costs and selling and administrative expenses as either variable or fixed. Prepare a contribution margin income statement separating all variable and fixed costs into their own categories. Determine the breakeven point in units and dollars. Also determine the number of units and dollars that need to be sold to make a target profit of $5,000 a month. Identify what types of trends you should be aware of in the industry and who the primary competitors are. Answer the following question: If you had to improve the bottom l

Explanation / Answer

The process for making biscuits is given below.

Machineries required for the above mentioned manufacturing:

(Assuming the above machines life is 5 years costing $5000 having nil salvage value)

Initial Investment to be made for machine : $25000   

Fixed Cost are given below Factory Rent : $6000 Per year Salary (10 Employees with 1500$ per month) : $180000 Per year Interest Expense for loan of $30000 @ 2% p.a. : $600 Per year Other Misc. Expense : $24000 Per Year

Variable Cost are given below Material Cost : $0.20 per cookie Packing Cost : $0.02 per cookie

Selling Price : $0.50 per cookie

Budget

Breakeven Point (in units) = 22050/0.28 = 78750 Units per month

Breakeven Point (in Amount) = 78750 x 0.50 = $39375 per month

Breakeven Point at desired Profit of $5000 per month (in units) = (22050 + 5000)/0.28 = 96608 units per month

Breakeven Point at desired profit of $5000 per month (in amount) = 96608 x 0.50 = $48304

Particulars Monthly Quarterly Sale Price 100000 x 0.50 = $50000 300000 x 0.50 = $150000 Expenses Material Cost 100000 x 0.20 = $20000 300000 x 0.20 = $60000 Packing Material 100000 x 0.02 = $2000 300000 x 0.02 = $6000 Fixed Cost $22050 $66150 Profit $5950 $17850

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