Contribution margin income statement separating all variable

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Reference no: EM131212815

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 line, what would you do and what concerns would you have going forward?

Choose a piece of equipment that you might consider purchasing to increase production of your item and address the following questions:

What types of capital budgeting factors would you look at when deciding whether to do this? What would be the relevant costs that you would consider in this decision?

WHAT I HAVE SO FAR:

My product is vitamins with the following:

I would like to manufacture multivitamins. The manufacturing process will be the steps through which raw materials are transformed into a Finished Good. First a formula will need to be determined, created and turned into tablets. During the process of manufacturing multivitamins raw materials will be formulated into batches and tested for correct strength. Once this is completed a label containing all the correct information will be designed and sent out for creation by a vendor. Pre-printed labels, bottles, and closures will be purchased. Raw materials in the molds and vitamins are necessary after each part is made. They will be assembled, packaged, and sent out. Developing multivitamins you must be aware of how the industry is and your competitors. Multivitamins are not regulated by the FDA so there is no regulation mandatary in place. While adults and children already use multivitamins many are not aware that they are not necessary consuming what they believe they are. This could be a target for marketing. Possibilities of reducing the cost of material used and packaging of the product will save money but the only concern is having an accurate assessment and/or manufacturing audit to ensure batch strength. A piece of equipment I would purchase to increase production would be an injection molding I would purchase this to increase production. The capital budgeting factors is whether purchasing this machine will profit me in the long run with my investment. The cost of the machine, quality, how much faster this type of equipment would increase production, and maintenance.

Forecast the variable cost per unit.

Monthly Vitamins Produced: 100,000 Bottles

Raw Materials Costs: $35,000/month

Direct Labor Costs: $40,000/month

Total Cost: $75,000/month

Unit Variable Cost per Units = Variable Cost

$75,000/100,000 = $0.75 per Unit

Forecast manufacturing costs and selling and administrative expenses as either variable or fixed.

FIXED: General and Admin: $20,000/month

FIXED: Quality Control: $12,000/month

FIXED: Rent $8,000/month

VARIABLE: Equipment Maintenance: $8,000/month

VARIABLE: Utilities: $2,500/month

VARIABLE: Office Supplies $275.00/month

Reference no: EM131212815

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