Could you help me with my accounting essay Note 1Answer the

Could you help me with my accounting essay?

Note:

1.Answer the following questions in essay format.

2.The essay must include an introduction, body, and conclusion, and address all relevant parts of each question. Your response should be a minimum of 300 words in length. Make sure to cite any references you use. At a minimum, you must cite your textbook. Proper citation format for a reference includes the name of the author(s), the title of the work, the date of the publication, and the page number.

Cost-Volume-Profit Analysis

Suppose you have decided to start a business producing and selling a product of your choice from the following options: custom birthday cakes, lawn mowers or sport jackets.

For your essay, answer the following questions related to your product:

Briefly describe the product you would produce and sell. What market will you target this product for? At what price would you sell your product? Make a projection of your sales in units for the first year of operations.

Make a detailed list of the materials needed to make your product. (Use the textbook and/or outside research as necessary.) How much in materials will you need for the year? What is the cost of these materials?

Make a list of expenses you would incur in your business venture. (Use the textbook and/or outside research as necessary.) Examples include rent, utilities, insurance, direct labor, manufacturing overhead costs and so on. Estimate the cost of each of these expenses per year.

Classify all of your expenses as either fixed or variable, and calculate how many units of your product you would need to sell to break even.

How much operating income would you like to earn in the first year? Calculate how many units you would need to sell to meet your target profit.

How realistic is your potential venture? Do you think your target profit is achievable? Explain.

Solution

Ans:

Suppose we sell sports jacket. The cost of each Jacket is comprised of the following: Selling price of $1,000 and variable (flexible) cost of $400(Direct Labor 150, Direct Material 120, other variable cost 130). Total fixed (capacity-related) costs for Shop are $90,000. (Includes Rent 35,000, Utilities 25,000, Insurance 10,000, other fixed cost 20,000)

$1,000 - $400 = $600

Suppose we sold 200 jackets as target.

          Revenues – Flexible Costs – Capacity-Related Costs = Total Profit

200 ($1,000) – 200($400) - $90,000 = $30,000

            X = Capacity-Related Costs/Contribution Margin

X = $90,000/$600

                   X = 150 Jackets

        Total Revenues – Total Costs = Total Profit

$1,000X - $400X - $90,000 = $60,000

$600X = $150,000

X = $150,000/$600

X = 250 Jackets

The venture is realistic in nature and we can achieve the target profits if we plan and implement the actual planning.

Target Profit is 60,000 as seen in last working note.

We have to keep the price in competition of market.