n this project, you will demonstrate your mastery of the following competencies:

• Describe how managerial accounting supports management information systems
• Utilize managerial accounting techniques and models to support an organization’s strategic plan
• Explain how managerial accounting is used to make decisions about short-term business opportunities, capital investments, and evaluating operational performance
  

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Scenario

Your business has been open for a month, and you have prepared an income statement and completed a variance analysis on the data. Now you will meet with investors and a few other internal stakeholders to share your company’s progress over the past month and how it has performed with respect to your cost and budget projections. The investors would like to see the thought process behind your financial strategy and how your company has performed in its first month. They have therefore asked you to present a report that includes the costing and income data from your Project Workbook. Investor’s Report Competencies Assignment

Directions

Submit a detailed report to your potential investors and other stakeholders to explain and defend your costing strategies and to share your business’s performance to date. Your report can be in the form of a PowerPoint presentation or a Word document (based on the templates provided in the What to Submit section). In either format, be sure to effectively communicate with your stakeholders by breaking down concepts and using investor-friendly language to build their trust and confidence. If you choose to do a PowerPoint presentation, you’ll need to include speaker notes for each slide.

1. Introduction: Provide a short overview of your company and the purpose of this report.
   1. Business Overview: Name your company and describe its business and your vision for its future.
   2. Purpose of the Report: Explain the purpose of the report and describe why the information is important. Investor’s Report Competencies Assignment
   3. Methods and Approach: Explain the management accounting methods you used for generating the information that you are about to share in terms of your adherence to industry standards and the American Institute of Certified Public Accountants (AICPA) code of ethics.
2. Financial Strategy: Review your original business plan and costing strategies.
   1. Costing System: Justify the use of job order costing for this business. Be sure to compare and contrast the various costing systems you learned about in this course as part of your defense.
   2. Selling Prices: Share and explain the selling prices you established for each of your products. Be sure to reference your cost-volume-profit analysis in your defense.
   3. Contribution Margin: Share and explain your contribution margin per unit. Be sure to reference your cost-volume-profit analysis in your defense.
   4. Target Profits: Identify your break-even points for achieving different target profits. Then explain the target profits you selected for each area of your business. Be sure to reference your cost-volume-profit analysis in your defense.
3. Financial Statements: Using the information in the Milestone Two Market Research Data Appendix, assess your financial performance to date.
   1. Statement of Cost of Goods Sold: Share the statement of cost of goods sold and logically interpret the business’s performance against the provided benchmarks.
   2. Income Statement: Share the income statement and logically interpret the business’s performance against the provided benchmarks.
   3. Variances: Illustrate all variances for the direct labor time and the materials price.
   4. Significance of Variances: Evaluate the significance of the variances in terms of the potential to impact future budgeting decisions and planning. Investor’s Report Competencies Assignment

ACC-202 Brittny Deleon Southern New Hampshire University

7-1 Final Project: Investor Presentation

901 Main Street Dallas, TX 75204

COMPANY PROFILE

Head Over Paws

We believe in a world where furry family members receive the same level of customer services as the humans who feed them. We treat pets as if they were our own and prioritize their health and well-being over everything. Our hope is that you will fall ‘Head Over Paws’ in love with our services!

VISION

A pet is more than just an animal you share your home with, they are a part of your family! Our mission is to treat every pet with the upmost respect. We will love and care for them as our own! We promise to use the highest- quality resources and return your pet back to our care safely. Rest easy knowing your pet is in great hands with Heat Over Paws!

MISSION

INESTMENT OPPORTUNITY

Head Over Paws

CODE OF PROFESSIONAL CONDUCT

American Institute of Certified Public Accountants

Responsibility

Public Interest

Integrity

Objectivity & Independence

Due Care

Scope & Nature of Services

Cost Classification

Variable & Fixed Costs

Market Research

Contribution Margin Analysis

Break-Even Analysis

Statement of Cost of Services

Income Statement

ACCOUNTIN G PROCESS

Head Over Paws

JOB ORDER COSTING: consists of job cost sheets for each particular product

PROCESS COSTING: accumulates costs for

each department involvedVS. Investor’s Report Competencies Assignment

COST ACCOUNTING SYSTEMS

JOB ORDER COSTING

Head Over Paws

GROOMING Total variable costs = $9.97 Total fixed costs = $2,367.91

BOARDING Total variable costs = $7.35 Total fixed costs = $1,378.97

DAY CARE Total variable costs = $4.65 Total fixed costs = $858.44

SELLING PRICES Head Over Paws

GROOMING $25/groom = 5 dogs/day $30/groom = 4 dogs/day $35/groom = 3 dogs/day

BOARDING $25/dog = 12 dogs/day $28/dog = 10 dogs/day $30/dog = 7 dogs/day

DAY CARE $18/dog = 22 dogs/day $20/dog = 15 dogs/day $25/dog = 10 dogs/day

TARGET PROFITS Head Over Paws

• $0 Break-Even: 158 • $1,000 Target Profit:

225 • $1,500 Target profit:

258

GROOMIN G

• $0 Break-Even: 56 • $417 Target Profit: 84 • $667 Target Profit: 100

DAY CARE

• $0 Break-Even: 67 • $583Target Profit: 93 • $909 Target Profit: 111

BOARDING

GROOMIN G

$15.03

DAY CARE

$15.35

BOARDING

$20.65

CONTRIBUTION MARGIN

Head Over Paws

COST VARIANCES

FAVORABLE VARIANCE: actual cost is less than the standard cost

UNFAVORABLE VARIANCE:

actual cost is greater than the standard cost

Groomer Direct Labor Time Variance: $360

UNFAVORABLE

Groomer Direct Labor Rate Variance: ($90)

FAVORABLE

Direct Materials Quantity/Efficiency

Variance: $400

UNFAVORABLE

Direct Materials Price Variance: $1,200

UNFAVORABLE

COST VARIANCES Head Over Paws

THANK YOU!

References

Warren, C.S., Reeve, J.M., & Duchac, J. (2017) Managerial Accounting (14th ed.).

Boston, MA: Cengage Learning.

American Institute of Certified Public Accountants. (2019). AICPA Code of Professional

Conduct. Retrieved from https://pub.aicpa.org/codeofconduct/Ethics.aspx

Accounting-Simplified.com. (n.d.) Direct Material Price Variance. Retrieved from

https://accounting-simplified.com/management/variance-analysis/material/price.html

7-1 Final Project Submission: Presentation to Investors

By Jamie Smith

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P wtastic Dog Grooming and Boarding

Pawtastic Dog Grooming and Boarding offers professional services to dogs of all sizes, weights, and breeds. We promise to care for and treat your fur-baby with great care.

Reference: Images found through google search

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Company Profile

➢ Pawtastic Dog Grooming and Boarding is a pet-services business offering dog grooming, day care, and boarding in Texas.

➢ Our vision is to provide the utmost care to both the client and their pets by offering the highest quality of pet care, grooming services, and pet care.

➢ Our mission is to provide affordable professional dog grooming and boarding services by making the experience to be fun and relaxing for you and your pet. We promise Pawtastic treatment.

As the owner of Pawtastic Dog Grooming and Boarding, it is our wish to ensure all

pet needs are professionally cared for. We at Pawtastic Dog Grooming and Boarding

hire the most qualified and experienced staff who will dedicate their time and energy

in providing a safe and relaxing environment. With the vision and mission in mind, we

will be providing dog grooming, day care, and boarding services for all dog breeds.

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Purpose

➢ Information provided includes:

▪ Contribution Margin Analysis

▪ Break Even Analysis

▪ Cost of Services (COS) Schedule

▪ Income Statement

▪ Variances

I will share information concerning the contribution margin analysis, break even

analysis, and the profitable gains in the foreseeable future. In addition, sales cost will

also be discussed in comparison to the cost of services rendered to highlight the

amount of profit the company will achieve. Investor’s Report Competencies Assignment

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Methods

➢ Sustainability

▪ AICPA Code of Ethics

▪ Integrity

▪ The Public Interest

▪ Responsibilities

Pawtastic Dog Grooming and Boarding operates by following the American Institute of Certified Public Accountants (AICPA) Code of Ethics and by-laws, as well as, other acceptable accounting standards. This includes but is not limited to operating with integrity, using good judgments that will serve the public interest and honor their trust, as well as exercising objectivity and independence in all activities.

All financial statements included in this presentation were prepared according to generally accepted accounting principles (GAAP) standards and contains accurate and relevant information. By using this information and operating ethically, Pawtastic Dog Grooming and Boarding will be able to achieve it goals and mission. Twice a year the employees attend professional training to ensure they are familiar with the newest grooming technology and techniques as well as how to care for the dog entrusted to our care.

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Financial Strategy

Consultation

Analysis

Solutions

Monitor and Review

To ensure we meet our vision and mission our products and procedures will be monitored and review on a daily basis, seeking consultation and/or changes as needed. The owner and employees will consult with each customer to learn their preferences and create a trustworthy relationship. We will review our products regularly seeking the highest quality of products while still maintaining an affordable price. When a situation happens we will seek agreeable solutions.

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Costing Systems

➢ Job Order Costing

▪ Cost for each manufactured/services quantity of product

➢ Process Based Costing

▪ Cost for each manufacturing department or process

➢ Activity Based Costing (ABC)

▪ Allocating factory overhead that uses multiple factory overhead rates based on different activities

Pawtastic Dog Grooming and Boarding utilizes the job order costing since it will provide three different services in its facility. Services provided include boarding, day care, and grooming, with each client having the option to use only one service or a combination of services per visit. This will give us the option to view each dog as a unique job to accumulate and report costs based on each dog. By using the job order costing method, clients will be billed as soon as services are rendered and services are only recorded upon completion. This method will also allow us to bill clients on a weekly, monthly, or quarterly basis which will allow us to secure deferred revenues or advance payment.

The process based costing system would not efficiently record and accumulate costs for the company as it is used to record information based on nearly identical services. The services provided by Pawtastic Dog Grooming and Boarding vary significantly from each other. Cost would then be determined on each individual service and not on individual dogs. It would be difficult to track the cost of each dog in order to accurately estimate the cost of each services provided by the company.

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Costing Systems

➢ Activity Based Costing (ABC)

▪ Allocating factory overhead that uses multiple factory overhead rates based on different activities

The Activity Based Costing (ABC) method identifies and assigns costs to overhead activities and then assigns those costs to products. This would not be an effective costing method for Pawtastic Dog Grooming and Boarding. The ABC method is based on the concept that only a few of the inventory items in a facility are used on a regular basis, with the remaining items being accessed at much longer intervals. It looks at the whole cost of a single service in comparison to looking at one aspect of the service.

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Selling Prices

➢ Cost Behavior

➢ Variable Costs

➢ Fixed Costs

➢ Mixed Costs

There are a few different factors we can consider to determine our prices. Cost behavior is the way a specific cost reacts to changes in activity levels. Cost may stay the same or may change in response to a change in activity. Variable costs are costs of labor or materials that change with sales. The amount of materials uses and labor required is dependent upon the number of dogs being services, variable costs will change. Fixed costs are cost that stay the same and are not dependent on the number of services performed. Mixed cost contain components of both variable and fixed cost behaviors. Investor’s Report Competencies Assignment

Pawtastic Dog Grooming and Boarding will be utilizing the fixed cost behavior to accurately estimate its fixed monthly cost needed to operate each service. This will also assist in estimating the amount needed to charge for each service.

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Selling Prices

➢ Variable Costs

▪ Grooming $9.97

▪ Day Care $4.65

▪ Boarding $7.35

➢ Fixed Costs

▪ Grooming $2,367.91

▪ Day Care $858.44

▪ Boarding $1,378.97

➢ Services

▪ Grooming: $25 per dog, 5 dogs daily for 30 days

▪ Day Care: $18 per dog, 22 dogs daily for 30 days

▪ Boarding: $25 per dog, 12 dogs daily for 30 days

The variable cost for grooming is $9.97 and the fixed cost is $2,367.91. There will be 5 grooms per day at $25 per dog, the total amount earned from grooming per month (assuming 30 days a month) would be $3,750. After deducting variable costs and fixed cost totals, the company will have a total profit of $1,372.12 per month in grooming.

The day care services revenue will be $11,880 (18 dogs x 22 daily x 30 days) and the foreseeable profits in this service would be $11,016.91 ($11,880 revenue – $4.65 variable cost – $858.44 fixed cost).

The revenue for the boarding services would be $9,000 (25 dogs x 12 daily x 30 days) and the foreseeable profits in this service would be $7,613.68 ($9.000 revenue – $7.35 variable cost – $1,378.97 fixed cost).

The estimated monthly profits for Pawtastic Dog Grooming and Boarding is $20,002.71.

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Target Profits

Services Target Profit 1 Target Profit 2

Grooming $1,000.00 $1,500.00

Day Care $417.00 $667.00

Boarding $583.00 $909.00

The minimum target profits as highlighted above were chosen based on analyzing the effects of changes in selling prices on profits and the effects of changes in costs on profits. The target profit also helps us to estimate the sales needed to acquire the required targeted profits.

For an example, if the current cost for grooming services is $25 per dog and 5 dogs per day, the company will have to decide when to increase selling prices and/or the number of dogs to achieve the second targeted profits.

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Contribution Margin

Grooming Day Care Boarding

Sales price $25.00 $18.00 $25.00

Variable Cost per unit $9.97 $4.65 $7.35

Contribution Margin $15.03 $13.35 $17.65

➢ The excess of sales over variable costs

➢ Provides insight into the profit potential of the company

The contribution margin is a product’s price minus all associated variable costs. By calculating the contribution margin, owners are able to compute the breakeven and target income sales, which can be used to decide how to price the services rendered. The contribution margin highlighted in the table above can also measure how growth in sales can translate to growth in profits. Once the fixed costs are covered, any additional contribution margin increases income from services.

The grooming services has a contribution margin of $15.03, the day care services is $13.35, and the boarding service is $17.65. This is the total revenue earned on a daily basis within each service minus any variable cost it may have. The additional costs the company will incur is from its fixed costs.

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Financial Statement – COS

The company started operations this year, making a $5,000 purchase to ensure there were sufficient materials to begin services. Materials were purchased in large qualities, leaving an ending balance for materials of $3,000 which can be used in future months. The total overhead and COS for the initial month is estimated to be 11,040. The COS statement above also is the starting point that will be used to estimate the amount of services that needs to be rendered to earn money back plus additional amount for a profit.

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Income Statement

From the income statement above, we can expect a monthly revenue of $17,512. We’ve already calculated the COS and estimated it to be $11,040 and expenses totaling $3,173. We can estimate a monthly net income of $3,299. This is the total amount of money the company will have remaining after paying out all expenses, and contributing to the cost of goods sold.

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Variance Analysis

A favorable cost variance occurs when the actual cost is less than the standard cost. An unfavorable cost variance occurs when the actual cost exceeds the standard cost. The price variance identifies if the company paid too much for each service. The quantity variance identifies if the company used too much material or hours to complete services. Since the groomer direct labor time variance is unfavorable, we will need to work towards cutting labor which could mean hiring less people and cutting hours. However, the groomer labor rate variance is favorable which means that the rate of pay selected is good but the company will have to reduce hours taken to complete task. Investor’s Report Competencies Assignment

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Addendum

Cost Classification

References: AICPA Professional Code of Conduct. (n.d.). Retrieved from https://pub.aicpa.org/codeofconduct/Ethics.aspx Managerial Accounting 14th Edition Retrieved from https://ng.cengage.com/static/nb/ui/evo/index.html?snapshotId=462822&id=16255 0367&eISBN=9781337270786

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Addendum

Contribution Margin

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Addendum

Break Even Analysis

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ACC 202 Milestone Three: Actual Costs and Revenue Data Appendix

At the end of the first month of opening your business, you calculate the actual operating costs of the business and the income you earned. You also notice and document the difference in what you budgeted for certain materials and labor against the actual amounts you spent on the same.

For your statement of cost of goods sold, use the following data regarding the actual costs incurred by the business over the past month:

• Materials purchased: $20,000 o Consumed 80% of the purchased materials

• Direct labor: $8,493.33 • Overhead costs: $3,765 Note: Assume that the beginning materials and ending work in process are zero for the month.

Use the following revenue and cost information for the income statement. Note that the revenue you use will depend on the pricing level options you chose in Milestone Two. Also, assume that after accounting for weekends and other holidays, there were 20 business days in the first month of operation. For example, if you chose a sales price of $20 per collar, the actual number of collars sold in the month was 33 per day or 33 x 20 = 660 per month.

The other costs incurred by the business include:

• General and administrative salaries o Receptionist: $1,950 o Owner salary: $500

• Depreciation: $165

Established Sales Price

Number of Items Sold per Day

Collars

$20 33

$24 28

$28 23

Leashes

$22 28

$26 23

$30 18

Harnesses

$25 25

$30 22

$35 20

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• Rent: $750 • Utilities and insurance: $600 • Scissors, thread, and cording: $1,200 • Loan repayment: $550

Variance At the end of the month, you find that the labor and materials spent on manufacturing collars was different from what you estimated:

• The collar maker had to work nine hours a day instead of eight due to an increased demand for collars.

• Because of the increased demand, the hourly rate you paid your employee for making the collars increased to $16.50.

• An increase in the cost of raw material led the direct material cost per collar to increase to $10.

• However, you also made and sold 60 more collars than you expected to sell in the month.

You now need to determine the variance in the materials and labor cost from what you estimated in Milestone Two based on the market research data.

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Milestone Two: Market Research Data

You have conducted some market research for style and size of products you want to use to launch your business. The market research has indicated the following sales price ranges will be optimal for your area depending on style of products you choose to sell:

! Collars o With pricing at $20 per collar, you can expect to sell 30 collars per day. o With pricing at $24 per collar, you can expect to sell 25 collars per day. o With pricing at $28 per collar, you can expect to sell 20 collars per day

! Leashes o With pricing at $22 per leash, you can expect to sell 28 leashes per day. o With pricing at $26 per leash, you can expect to sell 23 leashes per day. o With pricing at $30 per leash, you can expect to sell 18 leashes per day.

! Harnesses o With pricing at $25 per harness, you can expect to sell 25 harnesses per day. o With pricing at $30 per harness, you can expect to sell 22 harnesses per day. o With pricing at $35 per harness, you can expect to sell 20 harnesses per day.

Additionally, you will need to compare your break-even points for the following target profits for each area of your business to determine your prices:

! Collars o Break-even o $300 target profit each month o $500 target profit each month

! Leashes o Break-even o $400 target profit each month o $600 target profit each month

! Harnesses o Break-even o $500 target profit each month o $650 target profit each month

ACC 202 Milestone One: Operational Costs Data Appendix

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

o 3 collars per yard of webbing o 2 leashes per yard of webbing o 2 harnesses per yard of webbing

• Polyester/nylon ribbons—$9 per yard of ribbon o 3 collars per yard of webbing o 2 leashes per yard of webbing o 2 harnesses per yard of webbing

• Buckles made of cast hardware—$0.50 per buckle o 4 buckles used per collar o 3 buckles used per leash o 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

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