Please assume that you are creating a product. For your product, please perform the following:
1) Identify at least ten costs related to your product (Direct materials, Direct labor, Overhead, Period costs) - you much use each category at least once. Determine the value of each of these costs on a per unit level. Refer to lecture for additional explanation.
2) List each of your costs to determine the Total Product cost of your product.
3) Determine a reasonable Sales price for your product.
4) Determine the amount of Target profit you would like to earn from this product for each of the next three years.
5) Calculate Break-even based on your Target profit for each of the three years.
6) Create a proforma Income statement for each of the three years.
To receive credit, please ensure that your product is different than other students in the class.
Product chosen: Manufacture and sale of T shirts | ||||
1 | Costs related to the product: | |||
Category | Particulars | Total cost (Normal capacity = 1000 units) | Cost per unit ($) | |
Direct materials | Cloth (1 meter per unit) | 50000 | 50 | |
Direct materials | Thread (1 bundle per unit) | 20000 | 20 | |
Direct labour | 2 hours per unit @ 20 per hour | 40000 | 40 | |
Overheads (Variable) | Electricity charges (10 per unit) | 10000 | 10 | |
Selling commission (3 per unit) | 3000 | 3 | ||
Period costs | Factory Rent | 12000 | 12 | |
Factory Insurance | 12000 | 12 | ||
Equipment Insurance | 15000 | 15 | ||
Depreciation (p.m.) | 10000 | 10 | ||
Supervisor salary | 10000 | 10 |
2 | Total product cost (per unit) | |
Direct material cost (50+20) | 70 | |
Direct labour | 40 | |
Variable overheads (10+3) | 13 | |
Total factory cost | 123 | |
Fixed expenses (at normal capacity) | ||
Factory Rent | 12 | |
Factory Insurance | 12 | |
Equipment Insurance | 15 | |
Depreciation (p.m.) | 10 | |
Supervisory salary | 10 | |
Total fixed costs | 59 | |
Total expenses | 182 | |
4 | Target profit (25% on cost) | 46 |
3 | Sales price (182+25%) | 228 |
Year 1 | Year 2 | Year 3 | |
Target units | 1000 | 1100 | 1200 |
Sales (228 per unit) | 228000 | 250800 | 273600 |
Direct costs: | |||
Material (50 +20 per unit) | 70000 | 77000 | 84000 |
Labour (40 per unit) | 40000 | 44000 | 48000 |
Prime cost | 110000 | 121000 | 132000 |
Add: Variable overheads | |||
Electricity charges (10 per unit) | 10000 | 11000 | 12000 |
Selling commission (3 per unit) | 3000 | 3300 | 3600 |
Total variable cost | 13000 | 14300 | 15600 |
Contribution (Sales - Prime cost - Variable costs) | 105000 | 115500 | 126000 |
Less: Fixed expenses | |||
Factory Rent | 12000 | 14000 | 16000 |
Factory Insurance | 12000 | 12000 | 12000 |
Equipment Insurance | 15000 | 15000 | 15000 |
Depreciation (p.m.) | 10000 | 10000 | 10000 |
Supervisor salary | 10000 | 10000 | 10000 |
Total fixed expenses | 59000 | 61000 | 63000 |
Net profit / -Loss | 46000 | 54500 | 63000 |
Breakeven (units) = Fixed costs / Contribution per unit | |||
Fixed costs | 59000 | 51000 | 53000 |
Contribution per unit | 105 | 105 | 105 |
Break even (units) | 562 | 486 | 505 |
Break even (Sales) | 120809.5 | 104428.6 | 108523.8 |
Proforma Income Statement | Year 1 | Year 2 | Year 3 |
Revenue | 228000 | 250800 | 273600 |
Less: Cost of goods sold | 123000 | 135300 | 147600 |
Gross profit | 105000 | 115500 | 126000 |
Less: Fixed expenses | |||
Factory Rent | 12000 | 14000 | 16000 |
Factory Insurance | 12000 | 12000 | 12000 |
Equipment Insurance | 15000 | 15000 | 15000 |
Depreciation (p.m.) | 10000 | 10000 | 10000 |
Supervisory salary | 10000 | 10000 | 10000 |
Net income | 46000 | 54500 | 63000 |
Please assume that you are creating a product. For your product, please perform the following: 1)...
can you please help me out on creating this product and all
it's costs? i'm very confused, thank you in advance!!!!
That is the full question, I have to create a product and
include/create all that info for it
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